UNITED COMMUNITY BANKS INC - Quarter Report: 2022 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒

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

For the Quarterly Period Ended September 30, 2022

☐

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

For the Transition Period from ___________ to ___________

Commission file number 001-35095

UNITED COMMUNITY BANKS, INC.

(Exact name of registrant as specified in its charter)


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


125 Highway 515 East
Blairsville, Georgia						30512
(Address of principal executive offices)						(Zip code)

(706) 781-2265

(Registrant’s telephone number, including area code)


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

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

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

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

Yes ☐ No ☒

There were 106,169,829 shares of the registrant’s common stock, par value $1 per share, outstanding as of October 31, 2022.

UNITED COMMUNITY BANKS, INC.

FORM 10-Q

INDEX


		Glossary of Defined Terms	3
		Cautionary Note Regarding Forward-looking Statements	4
PART I - Financial Information
	Item 1.	Financial Statements

		Consolidated Balance Sheets (unaudited)	5

		Consolidated Statements of Income (unaudited)	6

		Consolidated Statements of Comprehensive Income (unaudited)	7

		Consolidated Statements of Changes in Shareholders’ Equity (unaudited)	8

		Consolidated Statements of Cash Flows (unaudited)	9

		Notes to Consolidated Financial Statements	10

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	59

	Item 4.	Controls and Procedures	59

PART II - Other Information

	Item 1.	Legal Proceedings	60
	Item 1A.	Risk Factors	60



	Item 5.	Other Information.	60
	Item 6.	Exhibits	61

Glossary of Defined Terms

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


Term						Definition
2021 10-K						United’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 25, 2022
ACL						Allowance for credit losses
AFS						Available-for-sale
ALCO						Asset/Liability Management Committee
AOCI						Accumulated other comprehensive income (loss)


Aquesta						Aquesta Financial Holdings, Inc. and its wholly-owned subsidiary, Aquesta Bank
ASU						Accounting standards update
Bank						United Community Bank
Board						United Community Banks Inc., Board of Directors
BOLI						Bank-owned life insurance
CECL						Current expected credit loss model
CET1						Common equity tier 1
CME						Chicago Mercantile Exchange
Company						United Community Banks Inc. (interchangeable with "United" below)
CVA						Credit valuation adjustment
FASB						Financial Accounting Standards Board
FDIC						Federal Deposit Insurance Corporation
Federal Reserve						Federal Reserve System
FHLB						Federal Home Loan Bank
FinTrust						FinTrust Capital Partners, LLC, and its operating subsidiaries, FinTrust Capital Advisors, LLC, FinTrust Capital Benefits Group, LLC and FinTrust Brokerage Services, LLC
FTE						Fully taxable equivalent
GAAP						Accounting principles generally accepted in the United States of America
GSE						U.S. government-sponsored enterprise
HELOC						Home equity lines of credit
HFI						Held for investment
Holding Company						United Community Banks, Inc. on an unconsolidated basis
HTM						Held-to-maturity
LIBOR						London Interbank Offered Rate

MD&A						Management's Discussion and Analysis of Financial Condition and Results of Operations
MBS						Mortgage-backed securities
NOW						Negotiable order of withdrawal
NPA						Nonperforming asset
OCI						Other comprehensive income (loss)
OREO						Other real estate owned
PCD						Purchased credit deteriorated
PPP						Paycheck Protection Program
Progress						Progress Financial Corporation and its wholly-owned subsidiary, Progress Bank & Trust
Reliant						Reliant Bancorp, Inc. and its wholly-owned subsidiary, Reliant Bank
Report						Quarterly Report on Form 10-Q
SBA						United States Small Business Administration

SEC						Securities and Exchange Commission

TDR						Troubled debt restructuring


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

Cautionary Note Regarding Forward-looking Statements

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

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

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

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

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

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

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

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

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

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

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

•our ability to attract and retain key employees;

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

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

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

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

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

•the availability of and access to capital;

•legislative (e.g., tax), regulatory or accounting changes that may adversely affect us;

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

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

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

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

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

We caution readers that the foregoing list of factors is not exclusive, is not necessarily in order of importance and readers should not place undue reliance on forward-looking statements. Additional factors that may cause actual results to differ materially from those contemplated by any forward-looking statements also may be found in our 2021 10-K (including the “Risk Factor” section of that report), Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K filed with the SEC and available at the SEC’s website at http://www.sec.gov. We do not intend to and, except as required by law, hereby disclaim any obligation to update or revise any forward-looking statement contained in this Report, which speaks only as of the date of its filing with the SEC, whether as a result of new information, future events, or otherwise. The financial statements and information contained herein have not been reviewed, or confirmed for accuracy or relevance, by the FDIC or any other regulator.

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements


UNITED COMMUNITY BANKS, INC.
Consolidated Balance Sheets (Unaudited)
(in thousands, except share data)


	September 30, 2022		December 31, 2021
ASSETS
Cash and due from banks	$	222,524	$	144,244
Interest-bearing deposits in banks	216,496		2,147,266
Federal funds and other short-term investments	45,000		27,000
Cash and cash equivalents	484,020		2,318,510
Debt securities available-for-sale	3,862,886		4,496,824
Debt securities held-to-maturity (fair value $2,241,160 and $1,148,804, respectively)	2,676,405		1,156,098
Loans held for sale	21,967		44,109
Loans and leases held for investment	14,882,484		11,760,346
Less allowance for credit losses - loans and leases	(148,502)		(102,532)
Loans and leases, net	14,733,982		11,657,814
Premises and equipment, net	288,597		245,296
Bank owned life insurance	300,365		217,713



Goodwill and other intangible assets, net	780,868		472,407
Other assets	538,765		338,000
Total assets	$	23,687,855	$	20,946,771
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Noninterest-bearing demand	$	8,198,129	$	6,956,981



Interest-bearing deposits	12,123,013		11,284,198


Total deposits	20,321,142		18,241,179


Long-term debt	324,515		247,360

Accrued expenses and other liabilities	407,488		235,987
Total liabilities	21,053,145		18,724,526
Shareholders' equity:
Preferred stock, $1 par value: 10,000,000 shares authorized; 4,000 shares Series I issued and outstanding; $25,000 per share liquidation preference	96,422		96,422
Common stock, $1 par value: 200,000,000 shares authorized, 106,162,861 and 89,349,826 shares issued and outstanding, respectively	106,163		89,350
Common stock issuable: 596,365 and 595,705 shares, respectively	11,966		11,288
Capital surplus	2,304,514		1,721,007
Retained earnings	452,788		330,654
Accumulated other comprehensive loss	(337,143)		(26,476)
Total shareholders' equity	2,634,710		2,222,245
Total liabilities and shareholders' equity	$	23,687,855	$	20,946,771

See accompanying notes to consolidated financial statements (unaudited).


UNITED COMMUNITY BANKS, INC.
Consolidated Statements of Income (Unaudited)
(in thousands, except per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021

Interest revenue:
Loans, including fees	$	174,065	$	128,477	$	476,072	$	382,261
Investment securities, including tax exempt of $2,568, $2,280, $7,762 and $6,685, respectively	36,953		18,540		91,043		51,530
Deposits in banks and short-term investments	2,869		658		5,209		1,235
Total interest revenue	213,887		147,675		572,324		435,026

Interest expense:






Deposits	9,880		3,142		17,313		11,981
Short-term borrowings	27		—		27		2

Long-term debt	4,206		3,494		12,515		11,564
Total interest expense	14,113		6,636		29,855		23,547
Net interest revenue	199,774		141,039		542,469		411,479
Provision for (release of) credit losses	15,392		(11,034)		44,082		(36,903)
Net interest revenue after provision for credit losses	184,382		152,073		498,387		448,382

Noninterest income:
Service charges and fees	9,569		9,350		28,644		25,255
Mortgage loan gains and other related fees	6,297		13,828		29,420		47,536
Wealth management fees	5,879		5,554		17,759		12,881
Gains from sales of other loans, net	2,228		2,353		9,226		7,506
Lending and loan servicing fees	2,946		2,825		7,518		7,070
Securities gains (losses), net	—		—		(3,688)		41
Other	5,003		6,185		15,474		20,352
Total noninterest income	31,922		40,095		104,353		120,641
Total revenue	216,304		192,168		602,740		569,023

Noninterest expenses:
Salaries and employee benefits	67,823		60,458		208,062		180,457
Communications and equipment	8,795		7,368		27,718		21,979
Occupancy	9,138		7,096		27,381		21,130
Advertising and public relations	2,544		1,458		6,332		4,150
Postage, printing and supplies	2,190		1,731		6,308		5,171
Professional fees	4,821		5,347		14,670		14,509
Lending and loan servicing expense	2,333		2,450		7,746		8,508
Outside services - electronic banking	3,159		2,308		8,629		6,811
FDIC assessments and other regulatory charges	2,356		1,723		6,796		5,520
Amortization of intangibles	1,678		1,028		5,207		2,942
Merger-related and other charges	1,746		1,437		17,905		4,058
Other	6,172		4,345		16,066		12,248
Total noninterest expenses	112,755		96,749		352,820		287,483
Income before income taxes	103,549		95,419		249,920		281,540
Income tax expense	22,388		21,603		53,898		63,758
Net income	$	81,161	$	73,816	$	196,022	$	217,782

Net income available to common shareholders	$	79,035	$	71,649	$	189,858	$	211,283

Net income per common share:
Basic	$	0.74	$	0.82	$	1.78	$	2.42
Diluted	0.74		0.82		1.78		2.42
Weighted average common shares outstanding:
Basic	106,687		87,211		106,616		87,274
Diluted	106,800		87,355		106,732		87,413

See accompanying notes to consolidated financial statements (unaudited).


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


	Three Months Ended September 30,						Nine Months Ended September 30,
	Before-tax Amount		Tax (Expense) Benefit		Net of Tax Amount		Before-tax Amount		Tax (Expense) Benefit		Net of Tax Amount
2022
Net income	$	103,549	$	(22,388)	$	81,161	$	249,920	$	(53,898)	$	196,022
Other comprehensive loss:
Unrealized losses on available-for-sale securities:
Unrealized holding losses	(104,754)		24,495		(80,259)		(429,607)		101,269		(328,338)
Reclassification of securities from available-for-sale to held-to-maturity	—		—		—		87,444		(20,770)		66,674
Realized losses included in net income	—		—		—		3,688		(979)		2,709
Net unrealized losses	(104,754)		24,495		(80,259)		(338,475)		79,520		(258,955)
Unrealized losses on held-to-maturity securities transferred from available-for-sale:
Reclassification of unrealized losses	—		—		—		(87,444)		20,770		(66,674)
Amortization of unrealized losses	4,473		(1,073)		3,400		6,242		(1,495)		4,747
Net activity	4,473		(1,073)		3,400		(81,202)		19,275		(61,927)
Derivative instruments designated as cash flow hedges:
Unrealized holding gains on derivatives	5,034		(1,286)		3,748		12,914		(3,299)		9,615
Losses on derivative instruments realized in net income	48		(12)		36		295		(75)		220
Net cash flow hedge activity	5,082		(1,298)		3,784		13,209		(3,374)		9,835


Amortization of defined benefit pension plan net periodic pension cost components	169		(43)		126		510		(130)		380


Total other comprehensive loss	(95,030)		22,081		(72,949)		(405,958)		95,291		(310,667)
Comprehensive income (loss)	$	8,519	$	(307)	$	8,212	$	(156,038)	$	41,393	$	(114,645)

2021
Net income	$	95,419	$	(21,603)	$	73,816	$	281,540	$	(63,758)	$	217,782
Other comprehensive loss:
Unrealized losses on available-for-sale securities:
Unrealized holding losses	(18,915)		4,686		(14,229)		(58,882)		15,766		(43,116)
Realized gains included in net income	—		—		—		(41)		14		(27)
Net unrealized losses	(18,915)		4,686		(14,229)		(58,923)		15,780		(43,143)

Derivative instruments designated as cash flow hedges:
Unrealized holding gains on derivatives	431		(111)		320		3,475		(888)		2,587
Losses on derivative instruments realized in net income	153		(39)		114		444		(113)		331
Net cash flow hedge activity	584		(150)		434		3,919		(1,001)		2,918


Amortization of defined benefit pension plan net periodic pension cost components	260		(66)		194		782		(200)		582


Total other comprehensive loss	(18,071)		4,470		(13,601)		(54,222)		14,579		(39,643)
Comprehensive income	$	77,348	$	(17,133)	$	60,215	$	227,318	$	(49,179)	$	178,139

See accompanying notes to consolidated financial statements (unaudited).


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


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

Balance at June 30, 2021	86,664,894	$	96,422	$	86,665	$	10,650	$	1,636,875	$	244,006	$	11,668	$	2,086,286
Net income										73,816				73,816
Other comprehensive loss												(13,601)		(13,601)
Common stock issued for acquisitions	132,299			133				4,268						4,401
Purchases of common stock	(342,744)			(343)				(9,657)						(10,000)
Preferred stock dividends										(1,719)				(1,719)
Common stock dividends ($0.20 per share)										(17,600)				(17,600)
Impact of equity-based compensation awards	101,093			101		345		136						582
Impact of other United sponsored equity plans	3,105			3		103		87						193

Balance at September 30, 2021	86,558,647	$	96,422	$	86,559	$	11,098	$	1,631,709	$	298,503	$	(1,933)	$	2,122,358


Balance at June 30, 2022	106,033,960	$	96,422	$	106,034	$	11,448	$	2,304,608	$	396,970	$	(264,194)	$	2,651,288
Net income										81,161				81,161
Other comprehensive loss												(72,949)		(72,949)

Preferred stock dividends										(1,719)				(1,719)
Common stock dividends ($0.22 per share)										(23,624)				(23,624)

Impact of equity-based compensation awards	126,400			126		389		(168)						347
Impact of other United sponsored equity plans	2,501			3		129		74						206
Balance at September 30, 2022	106,162,861	$	96,422	$	106,163	$	11,966	$	2,304,514	$	452,788	$	(337,143)	$	2,634,710












Balance at December 31, 2020	86,675,279	$	96,422	$	86,675	$	10,855	$	1,638,999	$	136,869	$	37,710	$	2,007,530
Net income										217,782				217,782
Other comprehensive loss												(39,643)		(39,643)
Common stock issued for acquisitions	132,299			133				4,268						4,401
Purchases of common stock	(492,744)			(493)				(14,608)						(15,101)
Preferred stock dividends										(5,157)				(5,157)
Common stock dividends ($0.58 per share)										(50,991)				(50,991)
Impact of equity-based compensation awards	171,938			172		992		1,706						2,870
Impact of other United sponsored equity plans	71,875			72		(749)		1,344						667

Balance at September 30, 2021	86,558,647	$	96,422	$	86,559	$	11,098	$	1,631,709	$	298,503	$	(1,933)	$	2,122,358

Balance at December 31, 2021	89,349,826	$	96,422	$	89,350	$	11,288	$	1,721,007	$	330,654	$	(26,476)	$	2,222,245
Net income										196,022				196,022
Other comprehensive loss												(310,667)		(310,667)

Impact of acquisitions	16,571,545			16,571				579,805						596,376

Preferred stock dividends										(5,157)				(5,157)
Common stock dividends ($0.64 per share)										(68,731)				(68,731)
Impact of equity-based compensation awards	175,843			176		1,843		2,885						4,904
Impact of other United sponsored equity plans	65,647			66		(1,165)		817						(282)

Balance at September 30, 2022	106,162,861	$	96,422	$	106,163	$	11,966	$	2,304,514	$	452,788	$	(337,143)	$	2,634,710

See accompanying notes to consolidated financial statements (unaudited).


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


	Nine Months Ended September 30,
	2022		2021
Operating activities:
Net income	$	196,022	$	217,782
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion, net	34,707		(8,082)
Provision for (release of) credit losses	44,082		(36,903)
Stock based compensation	6,649		4,814
Deferred income tax expense	6,063		21,290
Securities losses (gains), net	3,688		(41)
Gains from sales of other loans, net	(9,226)		(7,506)

Changes in assets and liabilities:
Other assets	(2,072)		32,952
Accrued expenses and other liabilities	92,084		21,597
Loans held for sale	136,405		37,009
Net cash provided by operating activities	508,402		282,912

Investing activities:
Debt securities held-to-maturity:
Proceeds from maturities and calls	140,253		51,770
Purchases	(326,494)		(716,399)
Debt securities available-for-sale:
Proceeds from sales	281,521		103,012
Proceeds from maturities and calls	493,848		709,435
Purchases	(1,665,466)		(1,909,879)
Net (increase) decrease in loans	(772,740)		234,855
Equity investments, outflows	(29,685)		(12,664)
Equity investments, inflows	17,336		7,007

Proceeds from sales of premises and equipment	4,846		2,272
Purchases of premises and equipment	(26,300)		(19,733)
Net cash received in (paid for) acquisition	35,243		(9,484)
Proceeds from sale of other real estate and repossessed assets	2,178		2,404
Other investing outflows	—		(210)
Other investing inflows	1,819		767
Net cash used in investing activities	(1,843,641)		(1,556,847)

Financing activities:
Net (decrease) increase in deposits	(423,750)		1,634,947

Repayment of long-term debt	—		(80,632)
Proceeds from FHLB advances	—		10,000
Repayment of FHLB advances	—		(10,000)



Repurchase of common stock	—		(15,101)
Cash dividends on common stock	(63,256)		(49,313)
Cash dividends on preferred stock	(5,157)		(5,157)
Other financing inflows	560		406
Other financing outflows	(7,648)		(2,041)
Net cash (used in) provided by financing activities	(499,251)		1,483,109

Net change in cash and cash equivalents	(1,834,490)		209,174

Cash and cash equivalents, beginning of period	2,318,510		1,608,619

Cash and cash equivalents, end of period	$	484,020	$	1,817,793

See accompanying notes to consolidated financial statements (unaudited).

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 1 – Basis of Presentation

United’s accounting and financial reporting policies conform to GAAP and reporting guidelines of banking regulatory authorities. The accompanying interim consolidated financial statements have not been audited. All material intercompany balances and transactions have been eliminated. A more detailed description of United’s accounting policies is included in its 2021 10-K.

In management’s opinion, all accounting adjustments necessary to accurately reflect the financial position and results of operations on the accompanying financial statements have been made. These adjustments are normal and recurring accruals considered necessary for a fair and accurate presentation. The results for interim periods are not necessarily indicative of results for the full year or any other interim periods. The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes appearing in United’s 2021 10-K.

Note 2 – Accounting Standards Updates and Recently Adopted Standards

Recently Adopted Standards

In July 2021, the FASB issued ASU No. 2021-05, Leases (Topic 842): Lessors - Certain Leases with Variable Lease Payments. The update amends the lease classification requirements for lessors to align them with practice under the former lease accounting standard. Specifically, lessors should classify a lease with variable lease payments that do not depend on a reference index or rate as an operating lease if certain criteria are met. United adopted this update as of January 1, 2022, with no material impact on the consolidated financial statements.

Recently Issued Standards

In March 2022, the FASB issued ASU No. 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method. The update expands the current last-of-layer method to a portfolio layer method which allows multiple hedged layers of a single closed portfolio and non-prepayable financial assets. In addition, the update specifies that eligible hedging instruments may include spot-starting or forward-starting swaps and that the number of hedged layers corresponds with the number of hedges designated. Finally, the update provides additional guidance on the accounting for and disclosure of hedge basis adjustments. For public entities, this guidance is effective for fiscal years beginning after December 15, 2022. United does not expect the new guidance to have a material impact on the consolidated financial statements.

In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The update eliminates the previous accounting guidance for TDRs by creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings when a borrower is experiencing financial difficulty. The update also requires that an entity disclose current-period gross charge-offs by year of origination. For public entities, this guidance is effective for fiscal years beginning after December 15, 2022. United does not expect the new guidance to have a material impact on the consolidated financial statements.

In June 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement (Topic 820) - Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The update clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account and, therefore, is not considered in measuring fair value. For public entities, this guidance is effective for fiscal years beginning after December 15, 2023. United does not expect the new guidance to have a material impact on the consolidated financial statements.

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 3 – Supplemental Cash Flow Information

The supplemental schedule of significant non-cash investing and financing activities for the nine months ended September 30, 2022 and 2021 is as follows (in thousands).


	Nine Months Ended September 30,
	2022		2021


Significant non-cash investing and financing transactions:

Transfers of loans to repossessed and foreclosed properties	$	2,566	$	1,712
Unsettled securities purchases	—		3,977
Transfers of AFS securities to HTM securities	1,288,982		—
Right-of-use assets obtained in exchange for lease liabilities	9,035		1,543
Acquisitions:
Assets acquired	3,254,173		22,823
Liabilities assumed	2,657,173		1,103
Net assets acquired	597,000		21,720
Common stock issued and options converted	596,376		4,401
Accrued purchase price and contingent consideration	—		7,700

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 4 – Acquisitions

Acquisition of Reliant

On January 1, 2022, United acquired all of the outstanding common stock of Reliant in a stock transaction. Reliant operated a 25-branch network primarily located in Middle Tennessee. United’s operating results for the three and nine months ended September 30, 2022 include the operating results of the acquired business for the period subsequent to the acquisition date of January 1, 2022.

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


Reliant
	Fair Value Recorded by United (1)
		January 1, 2022
	Assets
	Cash and cash equivalents	$	62,867
	Debt securities	249,107
	Loans held for sale	116,406
	Loans held for investment	2,320,737

	Premises and equipment	35,631
	Bank-owned life insurance	78,170
	Accrued interest receivable	12,027

	Net deferred tax asset	5,793
	Core deposit intangible	14,500
	Other assets	59,768
	Total assets acquired	$	2,955,006
	Liabilities
	Deposits	$	2,504,823
	Short-term borrowings	27,000
	Long-term debt	76,730
	Other liabilities	48,620
	Total liabilities assumed	2,657,173


	Total identifiable net assets	297,833
	Consideration transferred
	Cash	624
	Common stock issued (16,571,545 shares)	595,581
	Options converted	795
	Total fair value of consideration transferred	597,000
	Goodwill	$	299,167

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

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

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

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


	January 1, 2022
PCD loans:
Par value	$	258,462
ACL at acquisition	(12,737)
Non-credit discount	(3,294)
Purchase price	$	242,431

Non-PCD loans:
Fair value	$	2,078,306
Gross contractual amounts receivable	2,355,205
Estimate of contractual cash flows not expected to be collected	25,990

Pro forma information

The following table discloses the impact of the Reliant acquisition since the date of acquisition. The table also presents certain pro forma information as if Reliant had been acquired on January 1, 2021 and FinTrust had been acquired January 1, 2020. These results combine the historical results of the acquired entity with United’s consolidated statement of income. Adjustments were made for the estimated impact of certain fair value adjustments and other acquisition-related activity; however pro forma financial results presented are not necessarily indicative of what would have occurred had the acquisition taken place in earlier years.

Merger-related costs from the Reliant acquisition of $760,000 and $14.8 million have been excluded from the three and nine months ended September 30, 2022 pro forma information presented below and included in the three and nine months ended September 30, 2021 pro forma information presented below. Merger-related costs from the FinTrust acquisition of $262,000 and $515,000, respectively, have been excluded from the three and nine months ended September 30, 2021 pro forma information presented below. The actual results and pro forma information were as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	Revenue		Net Income		Revenue		Net Income
2022
Actual Reliant results included in statement of income since acquisition date	$	29,618	$	16,516	$	72,685	$	32,931
Supplemental consolidated pro forma as if Reliant had been acquired January 1, 2021	216,171		81,681		618,636		219,010

2021
Actual FinTrust results included in statement of income since acquisition date	$	2,017	$	(49)	$	2,017	$	(49)
Supplemental consolidated pro forma as if Reliant had been acquired January 1, 2021 and FinTrust had been acquired January 1, 2020	$	232,667	$	86,576	$	672,405	$	233,053

Announced Acquisition of Progress

On May 4, 2022, United announced an agreement to acquire Progress Financial Corporation and its wholly-owned subsidiary, Progress Bank & Trust, collectively referred to as “Progress”. Progress is headquartered in Huntsville, Alabama, and operates 14 offices in high-growth southeastern markets, including Huntsville, Birmingham, Daphne and Tuscaloosa in Alabama and the Florida Panhandle. As of September 30, 2022, Progress had total assets of $1.74 billion, total loans of $1.41 billion, and total deposits of $1.50 billion. The merger, which is subject to regulatory approval and other customary conditions, is expected to close in the first quarter of 2023.

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 5 – Investment Securities

During the first nine months of 2022, United transferred AFS debt securities to HTM with a fair value on the transfer date of $1.29 billion, which included unrealized losses recorded in AOCI totaling $87.4 million. No securities were transferred from AFS to HTM during the third quarter of 2022. Transfer date unrealized losses are amortized and reclassified out of AOCI as a yield adjustment, which is offset by discount accretion of the transferred HTM securities. Amortization of transfer date unrealized losses and discount accretion are recognized over the remaining life of the securities.

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


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
As of September 30, 2022
U.S. Treasuries	$	19,826	$	—	$	2,573	$	17,253
U.S. Government agencies & GSEs	99,620		—		18,275		81,345
State and political subdivisions	301,520		45		70,180		231,385
Residential MBS, Agency & GSEs	1,519,094		14		227,307		1,291,801

Commercial MBS, Agency & GSEs	721,345		—		114,360		606,985

Supranational entities	15,000		—		2,609		12,391
Total	$	2,676,405	$	59	$	435,304	$	2,241,160

As of December 31, 2021
U.S. Treasuries	$	19,803	$	20	$	—	$	19,823
U.S. Government agencies & GSEs	70,180		—		1,121		69,059
State and political subdivisions	257,688		4,341		4,080		257,949
Residential MBS, Agency & GSEs	381,641		2,021		3,687		379,975

Commercial MBS, Agency & GSEs	411,786		4,106		8,915		406,977

Supranational entities	$	15,000	$	21	$	—	$	15,021
Total	$	1,156,098	$	10,509	$	17,803	$	1,148,804

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

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


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
As of September 30, 2022
U.S. Treasuries	$	194,301	$	—	$	15,828	$	178,473
U.S. Government agencies & GSEs	272,492		655		17,121		256,026
State and political subdivisions	348,099		—		32,597		315,502
Residential MBS, Agency & GSEs	1,658,924		6		161,282		1,497,648
Residential MBS, Non-agency	382,185		—		22,943		359,242
Commercial MBS, Agency & GSEs	747,238		584		74,751		673,071
Commercial MBS, Non-agency	31,676		—		1,144		30,532
Corporate bonds	252,486		59		26,635		225,910
Asset-backed securities	333,665		10		7,193		326,482
Total	$	4,221,066	$	1,314	$	359,494	$	3,862,886

As of December 31, 2021
U.S. Treasuries	$	218,027	$	1,661	$	2,168	$	217,520
U.S. Government agencies & GSEs	189,855		605		3,428		187,032
State and political subdivisions	263,269		15,237		2,662		275,844
Residential MBS, Agency & GSEs	2,079,700		9,785		28,521		2,060,964
Residential MBS, Non-agency	81,925		2,249		4		84,170
Commercial MBS, Agency & GSEs	870,563		2,974		16,156		857,381
Commercial MBS, Non-agency	15,202		1,268		—		16,470
Corporate bonds	194,164		814		1,812		193,166
Asset-backed securities	603,824		2,000		1,547		604,277
Total	$	4,516,529	$	36,593	$	56,298	$	4,496,824

Securities with a carrying value of $1.96 billion and $1.46 billion were pledged, primarily to secure public deposits, at September 30, 2022 and December 31, 2021, respectively.

The following table summarizes HTM debt securities 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 September 30, 2022
U.S. Treasuries	$	17,253	$	2,573	$	—	$	—	$	17,253	$	2,573
U.S. Government agencies & GSEs	37,829		8,757		43,516		9,518		81,345		18,275
State and political subdivisions	127,575		32,375		96,164		37,805		223,739		70,180
Residential MBS, Agency & GSEs	650,062		105,555		640,314		121,752		1,290,376		227,307

Commercial MBS, Agency & GSEs	297,445		43,092		309,539		71,268		606,984		114,360

Supranational entities	12,391		2,609		—		—		12,391		2,609
Total unrealized loss position	$	1,142,555	$	194,961	$	1,089,533	$	240,343	$	2,232,088	$	435,304

As of December 31, 2021
U.S. Government agencies & GSEs	$	64,658	$	888	$	4,401	$	233	$	69,059	$	1,121
State and political subdivisions	131,128		3,590		9,006		490		140,134		4,080
Residential MBS, Agency & GSEs	289,132		3,687		—		—		289,132		3,687

Commercial MBS, Agency & GSEs	314,049		8,540		10,384		375		324,433		8,915

Total unrealized loss position	$	798,967	$	16,705	$	23,791	$	1,098	$	822,758	$	17,803

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

The following table summarizes AFS debt securities 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 September 30, 2022
U.S. Treasuries	$	92,422	$	2,882	$	86,051	$	12,946	$	178,473	$	15,828
U.S. Government agencies & GSEs	117,567		4,819		60,251		12,302		177,818		17,121
State and political subdivisions	257,976		17,220		55,291		15,377		313,267		32,597
Residential MBS, Agency & GSEs	1,213,430		119,863		282,679		41,419		1,496,109		161,282
Residential MBS, Non-agency	359,242		22,943		—		—		359,242		22,943
Commercial MBS, Agency & GSEs	367,162		19,548		278,170		55,203		645,332		74,751
Commercial MBS, Non-agency	30,532		1,144		—		—		30,532		1,144
Corporate bonds	170,581		18,944		52,727		7,691		223,308		26,635
Asset-backed securities	187,039		2,640		108,353		4,553		295,392		7,193
Total unrealized loss position	$	2,795,951	$	210,003	$	923,522	$	149,491	$	3,719,473	$	359,494

As of December 31, 2021
U.S. Treasuries	$	111,606	$	2,168	$	—	$	—	$	111,606	$	2,168
U.S. Government agencies & GSEs	132,893		2,591		20,093		837		152,986		3,428
State and political subdivisions	69,302		2,581		3,148		81		72,450		2,662
Residential MBS, Agency & GSEs	1,534,744		25,799		74,481		2,722		1,609,225		28,521
Residential MBS, Non-agency	12,608		4		—		—		12,608		4
Commercial MBS, Agency & GSEs	582,235		13,098		66,014		3,058		648,249		16,156

Corporate bonds	149,246		1,811		16		1		149,262		1,812
Asset-backed securities	195,164		1,546		571		1		195,735		1,547
Total unrealized loss position	$	2,787,798	$	49,598	$	164,323	$	6,700	$	2,952,121	$	56,298

At September 30, 2022, there were 755 AFS debt securities and 326 HTM debt securities that were in an unrealized loss position. United does not intend to sell nor does it believe it will be required to sell securities in an unrealized loss position prior to the recovery of their amortized cost basis. Unrealized losses at September 30, 2022 were primarily attributable to changes in interest rates.

At September 30, 2022 and December 31, 2021, estimated credit losses and, thus, the related ACL on HTM debt securities were de minimis due to the high credit quality of the portfolio, which included securities issued or guaranteed by U.S. Government agencies, GSEs, high credit quality municipalities and supranational entities. As a result, no ACL was recorded on the HTM portfolio at September 30, 2022 or December 31, 2021. In addition, based on the assessments performed at September 30, 2022 and December 31, 2021, there was no ACL required related to the AFS portfolio.

The following table presents accrued interest receivable for the periods indicated on HTM and AFS debt securities (in thousands), which was excluded from the estimate of credit losses.


	Accrued Interest Receivable
	September 30, 2022		December 31, 2021
HTM	$	6,135	$	3,596
AFS	13,232		9,868

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

The amortized cost and fair value of AFS and HTM debt securities at September 30, 2022, by contractual maturity, are presented in the following table (in thousands). Expected maturities may differ from contractual maturities because issuers and borrowers may have the right to call or prepay obligations.


	AFS				HTM
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within 1 year:
U.S. Treasuries	$	80,116	$	79,266	$	—	$	—
U.S. Government agencies & GSEs	174		172		—		—
State and political subdivisions	15,002		14,990		5,200		5,201
Corporate bonds	2,732		2,680		—		—

	98,024		97,108		5,200		5,201
1 to 5 years:
U.S. Treasuries	99,248		86,295		—		—
U.S. Government agencies & GSEs	38,672		34,652		—		—
State and political subdivisions	46,320		44,682		14,207		14,067
Corporate bonds	164,771		149,932		—		—

	349,011		315,561		14,207		14,067
5 to 10 years:
U.S. Treasuries	14,937		12,912		19,826		17,253
U.S. Government agencies & GSEs	77,779		69,039		53,505		45,109
State and political subdivisions	123,790		110,478		31,603		26,712
Corporate bonds	84,190		72,457		—		—
Supranational entities	—		—		15,000		12,391
	300,696		264,886		119,934		101,465
More than 10 years:
U.S. Government agencies & GSEs	155,867		152,163		46,115		36,236
State and political subdivisions	162,987		145,352		250,510		185,405
Corporate bonds	793		841		—		—

	319,647		298,356		296,625		221,641
Debt securities not due at a single maturity date:
Asset-backed securities	333,665		326,482		—		—
Residential MBS	2,041,109		1,856,890		1,519,094		1,291,801
Commercial MBS	778,914		703,603		721,345		606,985

Total	$	4,221,066	$	3,862,886	$	2,676,405	$	2,241,160

Realized gains and losses are derived using the specific identification method for determining the cost of securities sold. The following table summarizes AFS securities sales activity for the three and nine months ended September 30, 2022 and 2021 (in thousands).


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Proceeds from sales	$	—	$	24,901	$	281,521	$	103,012

Gross realized gains	$	—	$	—	$	1,009	$	641
Gross realized losses	—		—		(4,697)		(600)

Securities gains (losses), net	$	—	$	—	$	(3,688)	$	41

Income tax expense (benefit) attributable to sales	$	—	$	—	$	(979)	$	14

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 6 – Loans and Leases and Allowance for Credit Losses

Major classifications of the loan and lease portfolio (collectively referred to as the “loan portfolio” or “loans”) are summarized as of the dates indicated as follows (in thousands).


	September 30, 2022		December 31, 2021
Owner occupied commercial real estate	$	2,700,345	$	2,321,685
Income producing commercial real estate	3,298,847		2,600,858
Commercial & industrial (1)	2,237,591		1,910,162
Commercial construction	1,514,145		1,014,830
Equipment financing	1,280,856		1,083,021
Total commercial	11,031,784		8,930,556
Residential mortgage	2,149,490		1,637,885
HELOC	832,140		694,034
Residential construction	422,737		359,815
Manufactured housing	300,874		—
Consumer	145,459		138,056


Total loans	14,882,484		11,760,346

Less allowance for credit losses - loans	(148,502)		(102,532)

Loans, net	$	14,733,982	$	11,657,814

(1) Commercial and industrial loans as of September 30, 2022 and December 31, 2021 included $2.44 million and $88.3 million of PPP loans, respectively.

Accrued interest receivable related to loans totaled $43.1 million and $28.5 million at September 30, 2022 and December 31, 2021, respectively, and was reported in other assets on the consolidated balance sheets. Accrued interest receivable was excluded from the estimate of credit losses.

At September 30, 2022 and December 31, 2021, the loan portfolio was subject to blanket pledges on certain qualifying loan types with the FHLB and FRB to secure contingent funding sources.

The following table presents the amortized cost of loans held for investment that were sold in the periods indicated (in thousands). The gains on these loan sales were included in noninterest income on the consolidated statements of income.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Guaranteed portion of SBA/USDA loans	$	20,405	$	13,484	$	87,867	$	57,132
Equipment financing receivables	21,557		19,273		65,534		39,240
Total	$	41,962	$	32,757	$	153,401	$	96,372

At September 30, 2022 and December 31, 2021, equipment financing receivables included leases of $44.0 million and $37.7 million, respectively. The components of the net investment in leases, which included both sales-type and direct financing, are presented below (in thousands).


	September 30, 2022		December 31, 2021
Minimum future lease payments receivable	$	47,177	$	39,962
Estimated residual value of leased equipment	3,046		3,216
Initial direct costs	744		669
Security deposits	(472)		(687)

Unearned income	(6,482)		(5,432)
Net investment in leases	$	44,013	$	37,728

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Minimum future lease payments expected to be received from equipment financing lease contracts as of September 30, 2022 were as follows (in thousands):


Year
Remainder of 2022	$	4,521
2023	16,041
2024	11,714
2025	8,237
2026	4,891
Thereafter	1,773
Total	$	47,177

Nonaccrual and Past Due Loans HFI

The following table presents the aging of the amortized cost basis in loans by aging category and accrual status as of the dates indicated (in thousands). Past due status is based on contractual terms of the loan. The accrual of interest is generally discontinued when a loan becomes 90 days past due.


	Accruing
	Current Loans		Loans Past Due
			30 - 59 Days		60 - 89 Days		> 90 Days		Nonaccrual Loans		Total Loans
As of September 30, 2022
Owner occupied commercial real estate	$	2,696,495	$	2,597	$	376	$	—	$	877	$	2,700,345
Income producing commercial real estate	3,292,966		3,170		48		—		2,663		3,298,847
Commercial & industrial	2,224,863		1,383		213		24		11,108		2,237,591
Commercial construction	1,513,544		451		—		—		150		1,514,145
Equipment financing	1,274,342		1,918		1,398		—		3,198		1,280,856
Total commercial	11,002,210		9,519		2,035		24		17,996		11,031,784
Residential mortgage	2,136,977		1,703		386		—		10,424		2,149,490
HELOC	829,400		1,393		196		—		1,151		832,140
Residential construction	422,274		92		267		—		104		422,737
Manufactured housing	292,394		3,589		704		—		4,187		300,874
Consumer	145,166		223		49		4		17		145,459
Total loans	$	14,828,421	$	16,519	$	3,637	$	28	$	33,879	$	14,882,484

As of December 31, 2021
Owner occupied commercial real estate	$	2,318,944	$	27	$	—	$	—	$	2,714	$	2,321,685
Income producing commercial real estate	2,593,124		146		—		—		7,588		2,600,858
Commercial & industrial	1,903,730		584		419		—		5,429		1,910,162
Commercial construction	1,014,211		—		276		—		343		1,014,830
Equipment financing	1,079,180		1,415		685		—		1,741		1,083,021
Total commercial	8,909,189		2,172		1,380		—		17,815		8,930,556
Residential mortgage	1,622,754		1,583		235		—		13,313		1,637,885
HELOC	691,814		920		88		—		1,212		694,034
Residential construction	358,741		654		—		—		420		359,815
Consumer	137,564		421		19		—		52		138,056
Total loans	$	11,720,062	$	5,750	$	1,722	$	—	$	32,812	$	11,760,346

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

The following table presents nonaccrual loans held for investment by loan class for the periods indicated (in thousands).


	Nonaccrual Loans
	September 30, 2022						December 31, 2021
	With no allowance		With an allowance		Total		With no allowance		With an allowance		Total
Owner occupied commercial real estate	$	537	$	340	$	877	$	2,141	$	573	$	2,714
Income producing commercial real estate	2,263		400		2,663		6,873		715		7,588
Commercial & industrial	10,061		1,047		11,108		3,715		1,714		5,429
Commercial construction	47		103		150		—		343		343
Equipment financing	449		2,749		3,198		—		1,741		1,741
Total commercial	13,357		4,639		17,996		12,729		5,086		17,815
Residential mortgage	2,239		8,185		10,424		3,126		10,187		13,313
HELOC	300		851		1,151		219		993		1,212
Residential construction	67		37		104		280		140		420
Manufactured housing	—		4,187		4,187		—		—		—
Consumer	1		16		17		6		46		52
Total	$	15,964	$	17,915	$	33,879	$	16,360	$	16,452	$	32,812

Risk Ratings

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

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

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

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

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

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

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

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

The following tables present the risk category of term loans by vintage year, which is the year of origination or most recent renewal, as of the date indicated (in thousands).



	Term Loans												Revolvers		Revolvers converted to term loans		Total
As of September 30, 2022	2022		2021		2020		2019		2018		Prior
Pass
Owner occupied commercial real estate	$	537,628	$	690,355	$	630,238	$	217,689	$	132,341	$	297,665	$	107,380	$	5,948	$	2,619,244
Income producing commercial real estate	659,896		810,374		770,008		301,271		178,480		302,937		43,144		9,127		3,075,237
Commercial & industrial	391,665		442,865		199,960		142,415		126,773		80,396		691,597		18,923		2,094,594
Commercial construction	497,066		478,007		284,335		113,523		13,002		21,633		72,161		1,343		1,481,070
Equipment financing	535,508		411,108		187,297		108,817		31,409		2,596		—		—		1,276,735
Total commercial	2,621,763		2,832,709		2,071,838		883,715		482,005		705,227		914,282		35,341		10,546,880
Residential mortgage	640,179		762,959		339,633		94,368		58,005		237,641		8		3,120		2,135,913
HELOC	—		—		—		—		—		—		807,985		22,482		830,467
Residential construction	259,062		144,816		6,233		1,895		1,637		8,474		65		375		422,557
Manufactured housing	58,475		56,252		50,323		35,847		32,026		62,615		—		—		295,538
Consumer	58,222		34,549		18,008		5,420		2,314		856		25,869		129		145,367
	3,637,701		3,831,285		2,486,035		1,021,245		575,987		1,014,813		1,748,209		61,447		14,376,722
Special Mention
Owner occupied commercial real estate	6,540		7,663		5,262		9,585		4,217		5,164		3,065		2,964		44,460
Income producing commercial real estate	46,138		10,285		45,578		20,106		21,798		13,318		1		—		157,224
Commercial & industrial	16,279		32,282		5,751		847		1,337		250		34,169		297		91,212
Commercial construction	530		35		62		13,319		4,917		29		—		—		18,892
Equipment financing	—		—		—		—		—		—		—		—		—
Total commercial	69,487		50,265		56,653		43,857		32,269		18,761		37,235		3,261		311,788
Residential mortgage	—		—		—		—		—		—		—		—		—
HELOC	—		—		—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—		—		—
Manufactured housing	—		—		—		—		—		—		—		—		—
Consumer	—		—		—		—		—		—		—		—		—
	69,487		50,265		56,653		43,857		32,269		18,761		37,235		3,261		311,788
Substandard
Owner occupied commercial real estate	6,801		529		4,016		8,654		1,210		14,184		210		1,037		36,641
Income producing commercial real estate	34,352		1,779		1,368		4,621		13,292		10,519		391		64		66,386
Commercial & industrial	5,194		9,958		2,247		5,696		10,935		1,273		16,035		447		51,785
Commercial construction	148		42		47		3		3,925		9,772		—		246		14,183
Equipment financing	646		1,044		1,141		696		576		18		—		—		4,121
Total commercial	47,141		13,352		8,819		19,670		29,938		35,766		16,636		1,794		173,116
Residential mortgage	1,401		1,167		1,361		1,861		2,483		5,145		—		159		13,577
HELOC	—		—		—		—		—		—		24		1,649		1,673
Residential construction	2		—		—		21		4		153		—		—		180
Manufactured housing	424		672		739		690		953		1,858		—		—		5,336
Consumer	—		35		15		2		32		8		—		—		92
	48,968		15,226		10,934		22,244		33,410		42,930		16,660		3,602		193,974

Total	$	3,756,156	$	3,896,776	$	2,553,622	$	1,087,346	$	641,666	$	1,076,504	$	1,802,104	$	68,310	$	14,882,484

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)


	Term Loans												Revolvers		Revolvers converted to term loans		Total
As of December 31, 2021	2021		2020		2019		2018		2017		Prior
Pass
Owner occupied commercial real estate	$	643,151	$	674,124	$	278,702	$	153,233	$	139,584	$	267,460	$	68,354	$	17,150	$	2,241,758
Income producing commercial real estate	668,322		678,487		333,911		221,218		165,563		219,459		41,157		11,830		2,339,947
Commercial & industrial	638,567		270,150		178,944		136,281		50,567		72,904		514,750		4,361		1,866,524
Commercial construction	378,695		303,154		149,740		40,625		22,983		13,206		12,628		1,673		922,704
Equipment financing	563,618		271,913		167,904		63,254		13,145		903		—		—		1,080,737
Total commercial	2,892,353		2,197,828		1,109,201		614,611		391,842		573,932		636,889		35,014		8,451,670
Residential mortgage	781,007		370,092		108,091		64,346		71,552		221,131		9		3,915		1,620,143
HELOC	—		—		—		—		—		—		676,545		14,994		691,539
Residential construction	325,111		16,301		2,802		2,278		3,144		9,352		—		33		359,021
Consumer	57,530		29,218		10,757		5,137		1,439		1,355		32,312		111		137,859
	4,056,001		2,613,439		1,230,851		686,372		467,977		805,770		1,345,755		54,067		11,260,232
Special Mention
Owner occupied commercial real estate	7,772		2,979		16,639		4,374		6,007		2,641		248		286		40,946
Income producing commercial real estate	64,139		27,875		21,875		22,292		18,415		21,880		—		—		176,476
Commercial & industrial	1,037		1,831		2,740		597		273		303		2,242		—		9,023
Commercial construction	14,283		16,237		13,149		22,479		11,766		52		—		—		77,966
Equipment financing	—		—		—		—		—		—		—		—		—
Total commercial	87,231		48,922		54,403		49,742		36,461		24,876		2,490		286		304,411
Residential mortgage	—		—		—		—		—		—		—		—		—
HELOC	—		—		—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—		—		—
Consumer	—		—		—		—		—		—		—		—		—
	87,231		48,922		54,403		49,742		36,461		24,876		2,490		286		304,411
Substandard
Owner occupied commercial real estate	11,987		1,049		4,216		3,712		5,829		11,088		—		1,100		38,981
Income producing commercial real estate	15,485		12,618		3,779		29,212		6,726		16,531		—		84		84,435
Commercial & industrial	2,741		1,615		5,284		12,685		1,232		5,863		4,326		869		34,615
Commercial construction	3,464		157		272		11		9,750		255		—		251		14,160
Equipment financing	428		590		676		503		84		3		—		—		2,284
Total commercial	34,105		16,029		14,227		46,123		23,621		33,740		4,326		2,304		174,475
Residential mortgage	3,339		1,585		2,813		3,229		1,205		4,744		—		827		17,742
HELOC	—		—		—		—		—		—		329		2,166		2,495
Residential construction	407		—		30		51		—		306		—		—		794
Consumer	37		16		22		26		22		50		3		21		197
	37,888		17,630		17,092		49,429		24,848		38,840		4,658		5,318		195,703

Total	$	4,181,120	$	2,679,991	$	1,302,346	$	785,543	$	529,286	$	869,486	$	1,352,903	$	59,671	$	11,760,346

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Troubled Debt Restructurings

As of September 30, 2022 and December 31, 2021, United had TDRs totaling $42.9 million and $52.4 million, respectively. Loans modified under the terms of a TDR during the three and nine months ended September 30, 2022 and 2021 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 or otherwise in default of modified terms) during the periods presented and were initially restructured within one year prior to default (dollars in thousands).


	New TDRs									TDRs Modified Within the Previous Twelve Months That Have Subsequently Defaulted
		Post-Modification Amortized Cost by Type of Modification
	Number of Contracts	Rate Reduction		Structure		Other		Total		Number of Contracts	Amortized Cost
Three Months Ended September 30, 2022
Owner occupied commercial real estate	—	$	—	$	—	$	—	$	—	—	$	—
Income producing commercial real estate	—	—		—		—		—		—	—
Commercial & industrial	1	—		715		—		715		—	—
Commercial construction	—	—		—		—		—		—	—
Equipment financing	11	—		2,103		—		2,103		1	30
Total commercial	12	—		2,818		—		2,818		1	30
Residential mortgage	4	—		304		—		304		2	400
HELOC	—	—		—		—		—		—	—
Residential construction	—	—		—		—		—		—	—
Manufactured housing	—	—		—		—		—		—	—
Consumer	—	—		—		—		—		—	—
Total loans	16	$	—	$	3,122	$	—	$	3,122	3	$	430

Nine Months Ended September 30, 2022
Owner occupied commercial real estate	1	$	—	$	112	$	—	$	112	—	$	—
Income producing commercial real estate	—	—		—		—		—		—	—
Commercial & industrial	2	—		1,118		—		1,118		—	—
Commercial construction	—	—		—		—		—		—	—
Equipment financing	38	—		6,952		—		6,952		10	438
Total commercial	41	—		8,182		—		8,182		10	438
Residential mortgage	8	—		877		—		877		3	456
HELOC	7	—		1,242		6		1,248		—	—
Residential construction	—	—		—		—		—		—	—
Manufactured housing	—	—		—		—		—		—	—
Consumer	—	—		—		—		—		—	—
Total loans	56	$	—	$	10,301	$	6	$	10,307	13	$	894

Three Months Ended September 30, 2021
Owner occupied commercial real estate	—	$	—	$	—	$	—	$	—	—	$	—
Income producing commercial real estate	—	—		—		—		—		—	—
Commercial & industrial	3	—		166		—		166		—	—
Commercial construction	—	—		—		—		—		—	—
Equipment financing	11	—		399		—		399		3	96
Total commercial	14	—		565		—		565		3	96
Residential mortgage	6	—		649		—		649		1	180
HELOC	—	—		—		—		—		1	43
Residential construction	—	—		—		—		—		—	—

Consumer	—	—		—		—		—		—	—
Total loans	20	$	—	$	1,214	$	—	$	1,214	5	$	319

Nine Months Ended September 30, 2021
Owner occupied commercial real estate	1	$	—	$	543	$	—	$	543	—	$	—
Income producing commercial real estate	3	—		—		1,697		1,697		—	—
Commercial & industrial	7	—		531		103		634		1	11
Commercial construction	1	—		309		—		309		—	—
Equipment financing	47	—		2,861		—		2,861		11	296
Total commercial	59	—		4,244		1,800		6,044		12	307
Residential mortgage	12	—		1,040		—		1,040		4	593
HELOC	—	—		—		—		—		2	92
Residential construction	—	—		—		—		—		—	—

Consumer	—	—		—		—		—		—	—
Total loans	71	$	—	$	5,284	$	1,800	$	7,084	18	$	992

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Allowance for Credit Losses

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

At both September 30, 2022 and December 31, 2021, United used a one-year reasonable and supportable forecast period. Expected credit losses were estimated using a regression model for each segment based on historical data from peer banks combined with a third party vendor’s baseline economic forecast to predict the change in credit losses. These estimates were then combined with a starting value that was based on United’s recent default experience, with the results subject to a floor. At September 30, 2022, United applied qualitative adjustments to the model output for the income producing commercial real estate, commercial construction, HELOCs, residential mortgage and residential construction portfolios. With regard to income producing commercial real estate, the qualitative adjustments reflected continued credit concerns related to the senior care portfolio, elevated criticized loans relative to the pre-pandemic period and inflationary concerns related to the impact of rising rates on commercial real estate values. Qualitative adjustments for the other categories lowered the amount of required allowance due to management’s expectation with respect to the timing of deteriorating economic conditions in the forecast.

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

PPP loans were considered low risk assets due to the related 100% guarantee by the SBA and were therefore excluded from the calculation.

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

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


	Three Months Ended September 30,
	2022								2021
	Beginning Balance		Charge-Offs		Recoveries		(Release) Provision		Ending Balance		Beginning Balance		Charge-Offs		Recoveries		(Release) Provision		Ending Balance
Owner occupied commercial real estate	$	16,774	$	—	$	90	$	2,192	$	19,056	$	17,292	$	(443)	$	536	$	(3,241)	$	14,144
Income producing commercial real estate	33,284		(202)		26		(1,498)		31,610		30,967		(120)		75		(7,531)		23,391
Commercial & industrial	18,267		(373)		1,117		1,907		20,918		16,414		(320)		411		(262)		16,243
Commercial construction	16,062		—		(10)		1,902		17,954		9,180		—		123		(1,131)		8,172
Equipment financing	18,409		(1,987)		866		3,277		20,565		18,100		(1,165)		653		(288)		17,300
Residential mortgage	17,035		—		66		2,234		19,335		10,965		(127)		76		559		11,473
HELOC	7,487		(27)		129		884		8,473		6,357		(65)		167		(40)		6,419
Residential construction	2,086		—		109		109		2,304		1,918		—		37		(19)		1,936
Manufactured housing	6,614		(225)		5		958		7,352		—		—		—		—		—
Consumer	907		(1,010)		292		746		935		423		(611)		222		508		542
ACL - loans	136,925		(3,824)		2,690		12,711		148,502		111,616		(2,851)		2,300		(11,445)		99,620
ACL - unfunded commitments	16,117		—		—		2,681		18,798		10,844		—		—		411		11,255
Total ACL	$	153,042	$	(3,824)	$	2,690	$	15,392	$	167,300	$	122,460	$	(2,851)	$	2,300	$	(11,034)	$	110,875


	Nine Months Ended September 30,
	2022												2021
	Beginning Balance		Initial ACL - PCD loans (1)		Charge-Offs		Recoveries		(Release) Provision		Ending Balance		Beginning Balance		Charge- Offs		Recoveries		(Release) Provision		Ending Balance
Owner occupied commercial real estate	$	14,282	$	266	$	—	$	1,631	$	2,877	$	19,056	$	20,673	$	(1,503)	$	932	$	(5,958)	$	14,144
Income producing commercial real estate	24,156		4,366		(202)		432		2,858		31,610		41,737		(174)		304		(18,476)		23,391
Commercial & industrial	16,592		2,337		(4,978)		3,095		3,872		20,918		22,019		(4,017)		6,855		(8,614)		16,243
Commercial construction	9,956		2,857		(41)		548		4,634		17,954		10,952		(224)		618		(3,174)		8,172
Equipment financing	16,290		—		(4,644)		2,349		6,570		20,565		16,820		(4,411)		2,087		2,804		17,300
Residential mortgage	12,390		385		(53)		267		6,346		19,335		15,341		(342)		393		(3,919)		11,473
HELOC	6,568		60		(36)		565		1,316		8,473		8,417		(99)		386		(2,285)		6,419
Residential construction	1,847		1		—		208		248		2,304		764		(10)		140		1,042		1,936
Manufactured housing	—		2,438		(533)		14		5,433		7,352		—		—		—		—		—
Consumer	451		27		(2,544)		879		2,122		935		287		(1,435)		710		980		542
ACL - loans	102,532		12,737		(13,031)		9,988		36,276		148,502		137,010		(12,215)		12,425		(37,600)		99,620
ACL - unfunded commitments	10,992		—		—		—		7,806		18,798		10,558		—		—		697		11,255
Total ACL	$	113,524	$	12,737	$	(13,031)	$	9,988	$	44,082	$	167,300	$	147,568	$	(12,215)	$	12,425	$	(36,903)	$	110,875

(1) Represents the initial ACL related to PCD loans acquired in the Reliant transaction.

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 7 – Derivatives and Hedging Activities

The table below presents the fair value of derivative financial instruments, which are included in other assets and other liabilities on the consolidated balance sheet, as of the dates indicated (in thousands):


	September 30, 2022						December 31, 2021
	Notional Amount		Fair Value				Notional Amount		Fair Value
			Derivative Asset		Derivative Liability				Derivative Asset		Derivative Liability
Derivatives designated as hedging instruments:
Cash flow hedge of subordinated debt	$	100,000	$	16,311	$	—	$	100,000	$	6,389	$	—
Cash flow hedge of trust preferred securities	20,000		—		—		20,000		—		—
Fair value hedge of brokered time deposits	—		—		—		10,000		—		—
Total	120,000		16,311		—		130,000		6,389		—

Derivatives not designated as hedging instruments:
Customer derivative positions	1,090,067		16		92,444		1,206,145		28,656		10,663
Dealer offsets to customer derivative positions	1,090,067		24,005		—		1,230,885		974		9,232
Risk participations	79,827		4		1		69,385		16		7
Mortgage banking - loan commitment	33,265		290		155		110,897		3,450		—
Mortgage banking - forward sales commitment	88,000		1,994		30		201,419		67		202
Bifurcated embedded derivatives	51,935		11,724		—		51,935		2,928		—
Dealer offsets to bifurcated embedded derivatives	51,935		—		13,505		51,935		—		5,041
Total	2,485,096		38,033		106,135		2,922,601		36,091		25,145

Total derivatives	$	2,605,096	$	54,344	$	106,135	$	3,052,601	$	42,480	$	25,145

Total gross derivative instruments			$	54,344	$	106,135			$	42,480	$	25,145
Less: Amounts subject to master netting agreements			(230)		(230)				(694)		(694)
Less: Cash collateral received/pledged			(39,811)		(13,155)				(6,620)		(14,148)
Net amount			$	14,303	$	92,750			$	35,166	$	10,303

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

Hedging Derivatives

Cash Flow Hedges of Interest Rate Risk

United enters into cash flow hedges to mitigate exposure to the variability of future cash flows or other forecasted transactions. As of September 30, 2022 and December 31, 2021, United utilized interest rate caps and swaps to hedge the variability of cash flows due to changes in interest rates on certain of its variable-rate subordinated debt and trust preferred securities. United considers these derivatives to be highly effective at achieving offsetting changes in cash flows attributable to changes in interest rates. Therefore, changes in the fair value of these derivative instruments are recognized in OCI. Gains and losses related to changes in fair value are reclassified into earnings in the periods the hedged forecasted transactions occur. Losses representing amortization of the premium recorded on cash flow hedges, which is a component excluded from the assessment of effectiveness, are recognized in earnings on a straight-line basis in the same caption as the hedged item over the term of the hedge. Over the next twelve months, United expects to reclassify $2.34 million of gains from AOCI into earnings related to these agreements.

Fair Value Hedges of Interest Rate Risk

United is exposed to changes in the fair value of certain of its fixed-rate obligations due to changes in interest rates. United uses interest rate derivatives to manage its exposure to changes in fair value on these instruments attributable to changes in 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.

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

At December 31, 2021, United had an interest rate swap that was designated as a fair value hedge of fixed-rate brokered time deposits. During the first quarter of 2022, the hedged brokered deposit and the associated swap matured. The swap involved the receipt of fixed-rate amounts from a counterparty in exchange for United making variable rate payments over the life of the agreements.

The table below presents the effect of derivatives in hedging relationships, all of which are interest rate contracts, on the consolidated statement of income for the periods indicated (in thousands).



	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021

Total interest expense presented in the consolidated statements of income	$	(14,113)	$	(6,636)	$	(29,855)	$	(23,547)
Effect of hedging relationships on interest expense:




Net income recognized on fair value hedges	—		43		28		167



Net expense recognized on cash flow hedges (1)	(48)		(153)		(295)		(444)

(1) Includes premium amortization expense excluded from the assessment of hedge effectiveness of $119,000 for both the three months ended September 30, 2022 and 2021, and $353,000 for both the nine months ended September 30, 2022 and 2021.

Derivatives Not Designated as Hedging Instruments

Customer derivative positions include swaps, caps, and collars between United and certain commercial loan customers with offsetting positions to dealers under a back-to-back program. In addition, United occasionally enters into credit risk participation agreements with counterparty banks to accept or transfer a portion of the credit risk related to interest rate swaps. The agreements, which are typically executed in conjunction with a participation in a loan with the same customer, allow customers to execute an interest rate swap with one bank while allowing for the distribution of the credit risk among participating members.

United also has three interest rate swap contracts that are not designated as hedging instruments but are economic hedges of market-linked brokered certificates of deposit. The market-linked brokered certificates of deposit contain embedded derivatives that are bifurcated from the host instruments and are marked to market through earnings. The fair value marks on the market-linked swaps and the bifurcated embedded derivatives tend to move in opposite directions with changes in 90-day LIBOR and therefore provide an economic hedge.

In addition, United originates certain residential mortgage loans with the intention of selling these loans. Between the time United enters into an interest-rate lock commitment to originate a residential mortgage loan that is to be held for sale and the time the loan is funded and eventually sold, United is subject to the risk of variability in market prices. United enters into forward sale agreements to mitigate risk and to protect the expected gain on the eventual loan sale. The commitments to originate residential mortgage loans and forward loan sales commitments are freestanding derivative instruments. Fair value adjustments on these derivative instruments are recorded within mortgage loan gains and other related fee income in the consolidated statements of income.

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


	Location of Gain (Loss) Recognized in Income on Derivatives	Amount of Gain (Loss) Recognized in Income on Derivatives
		Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021

Customer derivatives and dealer offsets	Other noninterest income	$	471	$	599	$	1,685	$	2,551
Bifurcated embedded derivatives and dealer offsets	Other noninterest income	(108)		—		90		417


Mortgage banking derivatives	Mortgage loan revenue	1,047		(1,407)		8,297		(1,065)
Risk participations	Other noninterest income	(1)		—		93		—
		$	1,409	$	(808)	$	10,165	$	1,903

Credit-Risk-Related Contingent Features

United manages its credit exposure on derivatives transactions by entering into a bilateral credit support agreement with each non-customer counterparty. The credit support agreements require collateralization of exposures beyond specified minimum threshold amounts. The details of these agreements, including the minimum thresholds, vary by counterparty.

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

United’s agreements with each of its derivative counterparties provide that if either party defaults on any of its indebtedness, then it could also be declared in default on its derivative obligations. The agreements with derivative counterparties also include provisions that if not met, could result in United being declared in default. United has agreements with certain of its derivative counterparties that provide that if United fails to maintain its status as a well-capitalized institution or is subject to a prompt corrective action directive, the counterparty could terminate the derivative positions and United would be required to settle its obligations under the agreements. Derivatives that are centrally cleared do not have credit-risk-related features that would require additional collateral if United’s credit rating were downgraded.

Note 8 – Goodwill and Other Intangible Assets

The carrying amount of goodwill and other intangible assets as of the dates indicated is summarized below (in thousands).


	September 30, 2022		December 31, 2021
Core deposit intangible	$	46,900	$	38,192
Less: accumulated amortization	(24,690)		(25,870)
Net core deposit intangible	22,210		12,322
Customer relationship intangible	8,400		8,400
Less: accumulated amortization	(916)		(322)
Net customer relationship intangible	7,484		8,078
Total intangibles subject to amortization, net (1)	29,694		20,400
Goodwill	751,174		452,007
Total goodwill and other intangible assets, net	$	780,868	$	472,407

(1) As intangible assets become fully amortized, they are excluded from balances presented.

During the first quarter of 2022, as a result of the Reliant acquisition, United recorded a core deposit intangible of $14.5 million. See Note 4 for further detail.

The following is a summary of changes in the carrying amounts of goodwill (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021

Balance, beginning of period (1)	$	751,174	$	367,809	$	452,007	$	367,809
Acquisitions	—		14,163		299,167		14,163

Balance, end of period (1)	$	751,174	$	381,972	$	751,174	$	381,972

(1) Goodwill balances are shown net of accumulated impairment losses of $306 million incurred prior to 2021.

The estimated aggregate amortization expense for future periods for finite lived intangibles is as follows (in thousands):



Remainder of 2022	$	1,620
2023	5,903
2024	5,018
2025	4,051
2026	3,303
Thereafter	9,799
Total	$	29,694

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 9 - Long-term Debt

Long-term debt consisted of the following (in thousands):


	September 30, 2022		December 31, 2021		Issue Date	Stated Maturity Date	Earliest Call Date	Interest Rate






2027 senior debentures	35,000		35,000		2015	2027	2025	5.500% through August 2025, 3-month LIBOR plus 3.71% thereafter
2030 senior debentures	100,000		100,000		2020	2030	2025	5.00% through June 2025, 3-month SOFR plus 4.87% thereafter
Total senior debentures	135,000		135,000

2028 subordinated debentures	100,000		100,000		2018	2028	2023	4.500% through January 2023, 3-month LIBOR plus 2.12% thereafter
2029 subordinated debentures	60,000		—		2019	2029	2024	5.125% until December 2024, 3-month SOFR plus 3.765% thereafter
Total subordinated debentures	160,000		100,000


Tidelands Statutory Trust I	8,248		8,248		2006	2036	*	3-month LIBOR plus 1.38%
Four Oaks Statutory Trust I	12,372		12,372		2006	2036	*	3-month LIBOR plus 1.35%
Community First Capital Trust I	3,093		—		2002	2032	*	Prime plus 0.50%
Community First Capital Trust II	5,155		—		2005	2035	*	3-month LIBOR plus 1.50%
Community First Capital Trust III	5,464		—		2007	2037	*	3-month LIBOR plus 3.00%
Total trust preferred securities	34,332		20,620
Less net discount	(4,817)		(8,260)
Total long-term debt	$	324,515	$	247,360

* Indicates currently redeemable.

Interest is currently paid at least semiannually for all senior and subordinated debentures and trust preferred securities. All debt instruments reported above are obligations of the Holding Company.

During the first quarter of 2022, United assumed subordinated debentures and trust preferred securities with an acquisition date fair value of $76.7 million as part of the Reliant acquisition. See Note 4 for further detail.

Note 10 – Assets and Liabilities Measured at Fair Value

Fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, United uses a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). United has processes in place to review the significant valuation inputs and to reassess how the instruments are classified in the valuation framework.

Fair Value Hierarchy

Level 1 Valuation is based upon quoted prices (unadjusted) in active markets for identical assets or liabilities that United has the ability to access.

Level 2 Valuation is based upon quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals.

Level 3 Valuation is generated from model-based techniques that use at least one significant assumption based on unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity.

In instances when the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

significant to the fair value measurement in its entirety. The assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

The following is a description of the valuation methodologies used for assets and liabilities recorded at fair value.

Investment Securities

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

Deferred Compensation Plan Assets and Liabilities

Included in other assets in the consolidated balance sheet are assets related to employee deferred compensation plans. The assets associated with these plans are invested in mutual funds and classified as Level 1. Deferred compensation liabilities, also classified as Level 1, are carried at the fair value of the obligation to the employee, which mirrors the fair value of the invested assets and is included in other liabilities in the consolidated balance sheet.

Mortgage Loans Held for Sale

United has elected the fair value option for most of its newly originated mortgage loans held for sale in order to reduce certain timing differences and better match changes in fair values of the loans with changes in the value of derivative instruments used to economically hedge them. The fair value of mortgage loans held for sale is determined using quoted prices for a similar asset, adjusted for specific attributes of that loan, and are classified as Level 2. In connection with the Reliant acquisition, United acquired certain mortgage loans held for sale for which the fair value option was not elected; these loans are carried at the lower of aggregate cost or fair value.

Derivative Financial Instruments

United uses derivatives to manage interest rate risk. The valuation of these instruments is typically determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts and the discounted expected variable cash payments. The variable cash payments are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. United also uses best effort and mandatory delivery forward loan sale commitments to hedge risk in its mortgage lending business.

United incorporates CVAs as necessary to appropriately reflect the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, United has considered the effect of netting and any applicable credit enhancements, such as collateral postings, thresholds and guarantees.

Management has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy. However, the CVAs associated with these derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by itself and its counterparties. Generally, management’s assessment of the significance of the CVAs has indicated that they are not a significant input to the overall valuation of the derivatives. In cases where management’s assessment indicates that the CVA is a significant input, the related derivative is disclosed as a Level 3 value.

Other derivatives classified as Level 3 include structured derivatives for which broker quotes, used as a key valuation input, were not observable. Risk participation agreements are classified as Level 3 instruments due to the incorporation of significant Level 3 inputs used to evaluate the probability of funding and the likelihood of customer default. Interest rate lock commitments, which relate to mortgage loan commitments, are categorized as Level 3 instruments as the fair value of these instruments is based on unobservable inputs for commitments that United does not expect to fund.

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Servicing Rights for Residential and SBA/USDA Loans

United recognizes servicing rights upon the sale of residential and SBA/USDA loans sold with servicing retained. Management has elected to carry these assets at fair value. Given the nature of these assets, the key valuation inputs are unobservable and management classifies these assets as Level 3.

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).


September 30, 2022	Level 1		Level 2		Level 3		Total
Assets:
AFS debt securities:
U.S. Treasuries	$	178,473	$	—	$	—	$	178,473
U.S. Government agencies & GSEs	—		256,026		—		256,026
State and political subdivisions	—		315,502		—		315,502
Residential MBS	—		1,856,890		—		1,856,890
Commercial MBS	—		703,603		—		703,603
Corporate bonds	—		223,684		2,226		225,910
Asset-backed securities	—		326,482		—		326,482
Equity securities with readily available fair values	12,934		1,068		—		14,002
Mortgage loans held for sale	—		19,888		—		19,888
Deferred compensation plan assets	10,904		—		—		10,904
Servicing rights for SBA/USDA loans	—		—		6,078		6,078
Residential mortgage servicing rights	—		—		37,154		37,154
Derivative financial instruments	—		42,326		12,018		54,344
Total assets	$	202,311	$	3,745,469	$	57,476	$	4,005,256

Liabilities:
Deferred compensation plan liability	$	10,929	$	—	$	—	$	10,929
Derivative financial instruments	—		92,474		13,661		106,135

Total liabilities	$	10,929	$	92,474	$	13,661	$	117,064


December 31, 2021	Level 1		Level 2		Level 3		Total
Assets:
AFS debt securities:
U.S. Treasuries	$	217,520	$	—	$	—	$	217,520
U.S. Government agencies & GSEs	—		187,032		—		187,032
State and political subdivisions	—		275,844		—		275,844
Residential MBS	—		2,145,134		—		2,145,134
Commercial MBS	—		873,851		—		873,851
Corporate bonds	—		190,771		2,395		193,166
Asset-backed securities	—		604,277		—		604,277
Equity securities with readily available fair values	—		1,302		—		1,302
Mortgage loans held for sale	—		44,109		—		44,109
Deferred compensation plan assets	11,769		—		—		11,769
Servicing rights for SBA/USDA loans	—		—		6,513		6,513
Residential mortgage servicing rights	—		—		25,161		25,161
Derivative financial instruments	—		35,722		6,758		42,480
Total assets	$	229,289	$	4,358,042	$	40,827	$	4,628,158

Liabilities:
Deferred compensation plan liability	$	11,795	$	—	$	—	$	11,795
Derivative financial instruments	—		20,097		5,048		25,145
Total liabilities	$	11,795	$	20,097	$	5,048	$	36,940

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

The following table shows a reconciliation of the beginning and ending balances for the periods indicated for assets measured at fair value on a recurring basis using significant unobservable inputs that are classified as Level 3 values (in thousands).


	2022										2021
	Derivative Assets		Derivative Liabilities		SBA/USDA loan servicing rights		Residential mortgage servicing rights		Corporate Bonds		Derivative Assets		Derivative Liabilities		SBA/USDA loan servicing rights		Residential mortgage servicing rights		Corporate Bonds
Three Months Ended September 30,
Beginning balance	$	10,199	$	10,795	$	6,167	$	35,131	$	2,287	$	6,889	$	3,944	$	6,115	$	21,568	$	1,707

Additions	—		—		411		704		—		86		—		354		2,813		500

Sales and settlements	—		—		(220)		(602)		—		—		—		(357)		(875)		—
Fair value adjustments included in OCI	—		—		—		—		(61)		—		—		—		—		165
Fair value adjustments included in earnings	1,819		2,866		(280)		1,921		—		42		505		49		(444)		—
Ending balance	$	12,018	$	13,661	$	6,078	$	37,154	$	2,226	$	7,017	$	4,449	$	6,161	$	23,062	$	2,372

Nine Months Ended September 30,
Beginning balance	$	6,758	$	5,048	$	6,513	$	25,161	$	2,395	$	10,779	$	2,408	$	6,462	$	16,216	$	1,750

Additions	—		99		1,799		4,594		—		261		97		1,193		9,806		500
Transfers from Level 3	(290)		—		—		—		—		—		—		—		—		—
Sales and settlements	—		(1)		(857)		(1,916)		—		—		—		(1,001)		(3,430)		—
Fair value adjustments included in OCI	—		—		—		—		(169)		—		—		—		—		122
Fair value adjustments included in earnings	5,550		8,515		(1,377)		9,315		—		(4,023)		1,944		(493)		470		—
Ending balance	$	12,018	$	13,661	$	6,078	$	37,154	$	2,226	$	7,017	$	4,449	$	6,161	$	23,062	$	2,372

The following table presents quantitative information about significant Level 3 inputs for fair value on a recurring basis as of the dates indicated.


Level 3 Assets and Liabilities	Valuation Technique	Significant Unobservable Inputs	September 30, 2022			December 31, 2021
			Range	Weighted Average		Range	Weighted Average
SBA/USDA loan servicing rights	Discounted cash flow	Discount rate	5.8% - 25.0%	13.5	%	0.0% - 45.4%	10.3	%
		Prepayment rate	0.0 - 35.1	16.8		3.2 - 31.3	16.3
Residential mortgage servicing rights	Discounted cash flow	Discount rate	9.5 - 11.5	9.5		9.5 - 10.5	9.5
		Prepayment rate	7.0 - 32.3	7.4		7.0 - 77.6	12.6

Corporate bonds	Discounted cash flow	Discount rate	5.9 - 6.1	6.0		3.6 - 3.8	3.6
Derivative assets - customer derivative positions	Internal model	Estimated loss rate	N/A	N/A		33.4 - 44.0	36.0

Derivative assets - mortgage	Internal model	Pull through rate	45.0 - 100	90.7		45.9 - 100	87.2
Derivative assets and liabilities - other	Dealer priced	Dealer priced	N/A	N/A		N/A	N/A

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Fair Value Option

United generally records mortgage loans held for sale at fair value under the fair value option. Interest income on these loans is calculated based on the note rate of the loan and is recorded in interest revenue. In connection with the Reliant acquisition, United acquired mortgage loans held for sale accounted for under the lower of cost or fair value method. These loans are separately disclosed under the heading “Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis” within this footnote. The following tables present the fair value and outstanding principal balance of loans accounted for under the fair value option, as well as the gain or loss recognized from the change in fair value for the periods indicated (in thousands).


Mortgage Loans Held for Sale
	September 30, 2022		December 31, 2021
Outstanding principal balance	$	20,180	$	42,581
Fair value	19,888		44,109


Gain (Loss) from Change in Fair Value on Mortgage Loans Held for Sale
Location	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Mortgage loan gains and other related fees	$	(809)	$	(1,609)	$	(1,820)	$	(3,330)

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

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

United may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis. These adjustments to fair value usually result from the application of the lower of the amortized cost or fair value accounting or write-downs of individual assets due to impairment. The following table presents the fair value hierarchy and carrying value of assets that were still held as of September 30, 2022 and December 31, 2021, for which a nonrecurring fair value adjustment was recorded during the year-to-date periods presented (in thousands).


	Level 1		Level 2		Level 3		Total
September 30, 2022
Loans held for investment	$	—	$	—	$	1,820	$	1,820
Mortgage loans held for sale	—		—		2,079		2,079

December 31, 2021
Loans held for investment	$	—	$	—	$	2,536	$	2,536

Mortgage loans held for sale that were acquired from Reliant were subject to a nonrecurring fair value adjustment resulting from the application of the lower of the amortized cost or fair value accounting. As of September 30, 2022, these loans were classified as nonrecurring Level 3 because the valuation of these loans was based on indicative bids provided by a broker, not corroborated by market transactions.

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

Assets and Liabilities Not Measured at Fair Value

For financial instruments that have quoted market prices, those quotes are used to determine fair value. Financial instruments that have no defined maturity, have a remaining maturity of 180 days or less, or reprice frequently to a market rate, are assumed to have a fair value that approximates reported book value, after taking into consideration any applicable credit risk. If no market quotes are available, financial instruments are valued by discounting the expected cash flows using an estimated current market interest rate for the financial instrument. For off-balance sheet derivative instruments, fair value is estimated as the amount that United would receive or pay to terminate the contracts at the reporting date, taking into account the current unrealized gains or losses on open contracts.

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Cash and cash equivalents and repurchase agreements have short maturities and therefore the carrying value approximates fair value. Due to the short-term settlement of accrued interest receivable and payable, the carrying amount closely approximates fair value.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect the premium or discount on any particular financial instrument that could result from the sale of United’s entire holdings. All estimates are inherently subjective in nature. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial instruments include the mortgage banking operation, brokerage network, deferred income taxes, premises and equipment and goodwill. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

Off-balance sheet instruments (commitments to extend credit and standby letters of credit) for which draws can be reasonably predicted are generally short-term in maturity and are priced at variable rates. Therefore, the estimated fair value associated with these instruments is immaterial.

The carrying amount and fair values as of the dates indicated for other financial instruments that are not measured at fair value on a recurring basis are as follows (in thousands).


			Fair Value Level
	Carrying Amount		Level 1		Level 2		Level 3		Total
September 30, 2022
Assets:
HTM debt securities	$	2,676,405	$	17,253	$	2,223,907	$	—	$	2,241,160
Loans and leases, net	14,733,982		—		—		14,250,071		14,250,071


Liabilities:
Deposits	20,321,142		—		20,315,750		—		20,315,750

Long-term debt	324,515		—		—		313,944		313,944

December 31, 2021
Assets:
HTM debt securities	$	1,156,098	$	—	$	1,148,804	$	—	$	1,148,804
Loans and leases, net	11,657,814		—		—		11,607,821		11,607,821

Liabilities:
Deposits	18,241,179		—		18,239,934		—		18,239,934

Long-term debt	247,360		—		—		267,064		267,064

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 11 – Stock-Based Compensation

United has an equity compensation plan that allows for grants of various share-based compensation. The general terms of the plan include a vesting period (usually four years) with an exercisable period not to exceed ten years. Certain options and restricted stock unit awards provide for accelerated vesting if there is a change in control (as defined in the plan document). As of September 30, 2022, 2.80 million additional awards could be granted under the plan.

The table below presents restricted stock unit and option activity for the nine months ended September 30, 2022.


	Restricted Stock Unit Awards			Options
	Shares	Weighted- Average Grant- Date Fair Value		Aggregate Intrinsic Value ($000)		Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value ($000)
Outstanding at December 31, 2021	808,474	$	25.15			35,460	$	8.38
Granted	335,866	32.81				48,239	20.88
Released / Exercised	(289,860)	25.11		$	10,252	(16,257)	20.77			$	252

Cancelled	(29,925)	26.06				—	—
Outstanding at September 30, 2022	824,555	28.25		27,293		67,442	14.33		3.0	1,266

Vested / Exercisable at September 30, 2022	—	—				67,442	14.33		3.0	1,266

Options granted in 2022 reflect options assumed in the Reliant acquisition, with the weighted average exercise price of Reliant’s fully vested converted options determined pursuant to the purchase agreement. The value of the Reliant options was determined using a Black-Scholes model and was included in the purchase price for the acquisition. No compensation expense relating to options was included in earnings for the nine months ended September 30, 2022 and 2021.

Compensation expense for restricted stock units and performance stock units without market conditions is based on the market value of United’s common stock on the date of grant. Compensation expense for performance stock units with market conditions is based on the grant date per share fair value, which was estimated using the Monte Carlo Simulation valuation model. United recognizes the impact of forfeitures as they occur. The value of restricted stock unit and performance stock unit awards is amortized into expense over the service period.

For the nine months ended September 30, 2022 and 2021, expense of $6.24 million and $4.42 million, respectively, was recognized related to restricted stock unit and performance stock unit awards granted to United employees, which was included in salaries and employee benefits expense. In addition, for the nine months ended September 30, 2022 and 2021, $412,000 and $397,000, respectively, was recognized in other expense for restricted stock unit awards granted to members of United’s Board of Directors.

A deferred income tax benefit related to stock-based compensation expense of $1.70 million and $1.23 million was included in the determination of income tax expense for the nine months ended September 30, 2022 and 2021, respectively. As of September 30, 2022, there was $19.1 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 2.9 years.

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 12 – Reclassifications Out of AOCI

The following table presents the details regarding amounts reclassified out of AOCI for the periods indicated (in thousands). Amounts shown in parentheses reduce earnings.



Details about AOCI Components	Three Months Ended September 30,				Nine Months Ended September 30,				Affected Line Item in the Statement Where Net Income is Presented
	2022		2021		2022		2021
Realized gains (losses) on AFS securities:
	$	—	$	—	$	(3,688)	$	41	Securities gains (losses), net
	—		—		979		(14)		Income tax (expense) benefit
	$	—	$	—	$	(2,709)	$	27	Net of tax

Amortization of unrealized losses on HTM securities transferred from AFS:
	$	(4,473)	$	—	$	(6,242)	$	—	Investment securities interest revenue
	1,073		—		1,495		—		Income tax benefit
	$	(3,400)	$	—	$	(4,747)	$	—	Net of tax

Losses on derivative instruments accounted for as cash flow hedges:
Interest rate contracts	$	(48)	$	(153)	$	(295)	$	(444)	Long-term debt interest expense

	12		39		75		113		Income tax benefit
	$	(36)	$	(114)	$	(220)	$	(331)	Net of tax




Amortization of defined benefit pension plan net periodic pension cost components:
Prior service cost	$	(91)	$	(117)	$	(276)	$	(351)	Salaries and employee benefits expense
Actuarial losses	(78)		(143)		(234)		(431)		Other expense

	(169)		(260)		(510)		(782)		Total before tax
	43		66		130		200		Income tax benefit
	$	(126)	$	(194)	$	(380)	$	(582)	Net of tax

Total reclassifications for the period	$	(3,562)	$	(308)	$	(8,056)	$	(886)	Net of tax

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 13 – Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share for the periods indicated (in thousands, except per share data).


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income	$	81,161	$	73,816	$	196,022	$	217,782
Dividends on preferred stock	(1,719)		(1,719)		(5,157)		(5,157)
Earnings allocated to participating securities	(407)		(448)		(1,007)		(1,342)
Net income available to common shareholders	$	79,035	$	71,649	$	189,858	$	211,283

Weighted average shares outstanding:
Basic	106,687		87,211		106,616		87,274
Effect of dilutive securities:
Stock options	38		—		40		—
Restricted stock units	75		144		76		139
Diluted	106,800		87,355		106,732		87,413

Net income per common share:
Basic	$	0.74	$	0.82	$	1.78	$	2.42
Diluted	$	0.74	$	0.82	$	1.78	$	2.42

At September 30, 2022 and 2021, United had no potentially dilutive instruments outstanding that were not included in the above analysis.

Note 14 – Regulatory Matters

As of September 30, 2022, United and the Bank were categorized as well-capitalized under the regulatory requirements in effect at that time. To be categorized as well-capitalized, United and the Bank must have exceeded the well-capitalized guideline ratios in effect at the time, as set forth in the table below, and have met certain other requirements. Management believes that United and the Bank exceeded all well-capitalized requirements at September 30, 2022, and there have been no conditions or events since quarter-end that would change the status of well-capitalized.

Regulatory capital ratios at September 30, 2022 and December 31, 2021, along with the minimum amounts required for capital adequacy purposes and to be well-capitalized under regulatory requirements in effect at such times, are presented below for United and the Bank (dollars in thousands):


					United Community Banks, Inc. (Consolidated)						United Community Bank
	Minimum (1)		Well- Capitalized		September 30, 2022			December 31, 2021			September 30, 2022			December 31, 2021
Risk-based ratios:
CET1 capital	4.5	%	6.5	%	12.13		%	12.46		%	12.94		%	12.87		%
Tier 1 capital	6.0		8.0		12.68			13.17			12.94			12.87
Total capital	8.0		10.0		14.62			14.65			13.75			13.46
Leverage ratio	4.0		5.0		9.41			8.75			9.58			8.53

CET1 capital					$	2,101,819		$	1,688,176		$	2,234,151		$	1,738,557
Tier 1 capital					2,198,241			1,784,598			2,234,151			1,738,557
Total capital					2,534,810			1,984,376			2,374,603			1,818,335
Risk-weighted assets					17,332,391			13,548,534			17,269,896			13,512,405
Average total assets for the leverage ratio					23,359,608			20,402,842			23,308,849			20,377,319

(1) As of September 30, 2022 and December 31, 2021 the additional capital conservation buffer in effect was 2.50%

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 15 – Commitments and Contingencies

United is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet. The contract amounts of these instruments reflect the extent of involvement United has in particular classes of financial instruments. The exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and letters of credit written is represented by the contractual amount of these instruments. United uses the same credit policies in making commitments and conditional obligations as it uses for underwriting on-balance sheet instruments. In most cases, collateral or other security is required to support financial instruments with credit risk.

The following table summarizes the contractual amount of off-balance sheet instruments as of the dates indicated (in thousands).


	September 30, 2022		December 31, 2021
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit	$	4,592,092	$	3,591,975
Letters of credit	53,526		29,312

United holds minor investments in certain entities for tax credit and Community Reinvestment Act purposes. As of September 30, 2022 and December 31, 2021, the Bank had a recorded investment of $79.8 million and $52.7 million, respectively, in such investments, which is included in other assets on the consolidated balance sheet. As of September 30, 2022, United had committed to fund an additional $6.96 million related to future capital calls that are not reflected in the consolidated balance sheet.

As of September 30, 2022, the Holding Company also had $18.1 million in commitments for future capital calls to fintech fund limited partnerships that have not been reflected in the consolidated balance sheet.

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

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

The following is a discussion of our financial condition at September 30, 2022 and December 31, 2021 and our results of operations for the three and nine months ended September 30, 2022 and 2021. The purpose of this discussion is to focus on information about our financial condition and results of operations which is not otherwise apparent from our consolidated financial statements and is intended to provide insight into our results of operations and financial condition. The following discussion and analysis should be read along with our consolidated financial statements and related notes included in Part I - Item 1 of this Report, “Cautionary Note Regarding Forward-Looking Statements” and the risk factors discussed in our 2021 10-K, and the other reports we have filed with the SEC after we filed the 2021 10-K.

Unless the context otherwise requires, the terms “we,” “our,” “us” refer to United on a consolidated basis.

Overview

We offer a wide array of commercial and consumer banking services and investment advisory services primarily through a 193 branch network throughout Georgia, South Carolina, North Carolina, Tennessee and Florida. We have grown organically as well as through strategic acquisitions. At September 30, 2022, we had consolidated total assets of $23.7 billion and 2,826 full-time equivalent employees.

Recent Developments

Mergers and Acquisitions

Since September 30, 2021, we have continued to expand through acquisitions as follows:

◦On January 1, 2022, we acquired Reliant, a bank which operated a 25-branch network primarily located in Middle Tennessee. We acquired $2.96 billion of assets and assumed $2.66 billion of liabilities in the acquisition, which included $2.32 billion in loans and $2.50 billion in deposits as of the acquisition date.

◦On October 1, 2021, we acquired Aquesta, a bank which operated a network of branches primarily located in the Charlotte, North Carolina metropolitan area. We acquired total assets of $756 million, including $498 million in loans, and we assumed $658 million in deposits as of the acquisition date.

On May 4, 2022, we announced an agreement to acquire Progress, which we plan to complete in the first quarter of 2023. Progress is headquartered in Huntsville, Alabama, and operates 14 offices in high-growth southeastern markets, including Huntsville, Birmingham, Daphne and Tuscaloosa in Alabama and the Florida Panhandle. As of September 30, 2022, Progress had total assets of $1.74 billion, total loans of $1.41 billion, and total deposits of $1.50 billion.

Results of Operations

We reported net income and diluted earnings per common share of $81.2 million and $0.74, respectively, for the third quarter of 2022 compared to $73.8 million and $0.82, respectively, for the same period in 2021. Operating net income (non-GAAP), which excludes merger-related and other charges, was $82.5 million for the third quarter of 2022, compared to $74.9 million for the same period in 2021.

Net interest revenue increased to $200 million for the third quarter of 2022, compared to $141 million for the third quarter of 2021. The increase in interest revenue was provided by loan growth, including loans acquired from Aquesta and Reliant, continued investment in our securities portfolio and the impact of the current rising interest rate environment. These factors more than offset the increase in interest expense resulting from deposit growth and increased long-term debt, both of which also included increases resulting from acquisitions. In addition, while interest rates on interest-bearing deposits also increased, they did so at a slower rate than that of our interest-earning assets. Our net interest margin and net interest spread for the third quarter of 2022 increased compared to the same period of last year due to the rising interest rate environment, but was partially offset by the impact of tapering accelerated PPP deferred fee accretion and interest revenue and less purchased loan accretion compared to the same period of last year. The net interest margin for the three months ended September 30, 2022 and 2021 was 3.57% and 3.12%, respectively.

We recorded a provision for credit losses of $15.4 million for the third quarter of 2022, compared to a release of provision of $11.0 million for the third quarter of 2021. The provision expense in the third quarter of 2022 resulted from loan growth and a less favorable current economic outlook compared to that as of the prior quarter-end. The negative provision in 2021 resulted from an improved economic forecast at that time as the outlook of the COVID-19 pandemic had improved. We recorded net charge-offs for the third quarters of 2022 and 2021 totaling $1.13 million and $551,000, respectively.

Noninterest income of $31.9 million for the third quarter of 2022 was down $8.17 million, or 20%, from the third quarter of 2021. Lower gains on sales of mortgage loans and related fees, which were down $7.53 million compared to the same period of 2021, drove most of the decrease. The decrease reflects lower demand in the residential real estate mortgage market as interest rates have risen significantly since the third quarter of 2021. We also recorded unrealized losses on other investments during the third quarter of 2022 compared to unrealized gains in the same period of 2021, reflective of market conditions. These decreases were partially offset by an increase in BOLI income resulting from policies acquired with Reliant and Aquesta and death benefits received in 2022.

Noninterest expense of $113 million for the third quarter of 2022 increased $16.0 million compared to the same period of 2021. Most notably, salaries and employee benefits expense increased $7.37 million, which was primarily driven by the increase in employees resulting from acquisitions since September 30, 2021 and our annual salary merit-based increase effective in April of 2022. Occupancy and communications and equipment expense increased $2.04 million and $1.43 million, respectively, which was also primarily driven by the acquisitions of Aquesta and Reliant as our footprint continues to grow.

For the nine months ended September 30, 2022 and 2021, we reported net income of $196 million and $218 million, respectively, and diluted earnings per common share of $1.78 and $2.42, respectively. Operating net income (non-GAAP) for the nine months ended September 30, 2022 and 2021 of $210 million and $221 million, respectively, excluded merger-related charges for both periods. Net interest revenue and net interest margin for the nine months ended September 30, 2022 were $542 million and 3.25%, respectively, compared to $411 million and 3.17%, respectively, for the same period in 2021. In addition to the factors affecting the third quarter of 2022, results of operations for the nine months ended September 30, 2022 were also more heavily affected by the Reliant acquisition. Most notably, we incurred more significant merger-related and other charges and provision expense during the first nine months of 2022 compared to the same period of 2021. Merger-related and other charges increased $13.8 million, which is mostly reflective of Reliant merger-related costs and the second quarter Reliant systems conversion. Provision expense for the nine months ended September 30, 2022 was $44.1 million compared to a release of provision of $36.9 million during the comparable period of 2021. $18.3 million of the provision expense for the nine months ended September 30, 2022 was related to the establishment of the ACL for the acquired Reliant non-PCD loans and unfunded commitments.

Results for the third quarter and first nine months of 2022 are discussed in further detail throughout the following sections of MD&A.

Critical Accounting Estimates

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Our accounting and reporting estimates are in accordance with GAAP and conform to general practices within the banking industry. Estimates that are susceptible to significant changes include accounting for the ACL and fair value measurements, both of which require significant judgments by management. Actual results could differ significantly from those estimates. Also, different assumptions in the application of these accounting estimates could result in material changes in our consolidated financial position or consolidated results of operations. Our critical accounting estimates are discussed in MD&A in our 2021 10-K.

Non-GAAP Reconciliation and Explanation

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


UNITED COMMUNITY BANKS, INC.
Table 1 - Financial Highlights

(in thousands, except per share data)
	2022									2021						Third Quarter 2022 - 2021 Change		For the Nine Months Ended September 30,						YTD Change
	Third Quarter			Second Quarter			First Quarter			Fourth Quarter			Third Quarter					2022			2021
INCOME SUMMARY
Interest revenue	$	213,887		$	187,378		$	171,059		$	143,768		$	147,675				$	572,324		$	435,026
Interest expense	14,113			8,475			7,267			6,213			6,636					29,855			23,547
Net interest revenue	199,774			178,903			163,792			137,555			141,039			42	%	542,469			411,479			32	%
Provision for (release of) credit losses	15,392			5,604			23,086			(647)			(11,034)					44,082			(36,903)
Noninterest income	31,922			33,458			38,973			37,177			40,095			(20)		104,353			120,641			(14)
Total revenue	216,304			206,757			179,679			175,379			192,168			13		602,740			569,023			6
Noninterest expenses	112,755			120,790			119,275			109,156			96,749			17		352,820			287,483			23
Income before income tax expense	103,549			85,967			60,404			66,223			95,419			9		249,920			281,540			(11)
Income tax expense	22,388			19,125			12,385			14,204			21,603			4		53,898			63,758			(15)
Net income	81,161			66,842			48,019			52,019			73,816			10		196,022			217,782			(10)
Merger-related and other charges	1,746			7,143			9,016			9,912			1,437					17,905			4,058
Income tax benefit of merger-related and other charges	(385)			(1,575)			(1,963)			(2,265)			(328)					(3,923)			(909)


Net income - operating (1)	$	82,522		$	72,410		$	55,072		$	59,666		$	74,925		10		$	210,004		$	220,931		(5)

PERFORMANCE MEASURES
Per common share:
Diluted net income - GAAP	$	0.74		$	0.61		$	0.43		$	0.55		$	0.82		(10)		$	1.78		$	2.42		(26)
Diluted net income - operating (1)	0.75			0.66			0.50			0.64			0.83			(10)		1.91			2.45			(22)
Cash dividends declared	0.22			0.21			0.21			0.20			0.20			10		0.64			0.58			10
Book value	23.78			23.96			24.38			23.63			23.25			2		23.78			23.25			2
Tangible book value (3)	16.52			16.68			17.08			18.42			18.68			(12)		16.52			18.68			(12)
Key performance ratios:
Return on common equity - GAAP (2)(4)	11.02		%	9.31		%	6.80		%	9.32		%	14.26		%			9.08		%	14.55		%
Return on common equity - operating (1)(2)(4)	11.21			10.10			7.83			10.74			14.48					9.75			14.77
Return on tangible common equity - operating (1)(2)(3)(4)	15.60			14.20			11.00			13.93			18.23					13.64			18.55
Return on assets - GAAP (4)	1.32			1.08			0.78			0.96			1.48					1.06			1.52
Return on assets - operating (1)(4)	1.34			1.17			0.89			1.10			1.50					1.13			1.54
Net interest margin (FTE) (4)	3.57			3.19			2.97			2.81			3.12					3.25			3.17
Efficiency ratio - GAAP	48.41			56.58			57.43			62.12			53.11					53.94			53.72
Efficiency ratio - operating (1)	47.66			53.23			53.09			56.48			52.33					51.20			52.97
Equity to total assets	11.12			10.95			11.06			10.61			10.89					11.12			10.89

Tangible common equity to tangible assets (3)	7.70			7.59			7.72			8.09			8.53					7.70			8.53


ASSET QUALITY


NPAs	$	35,511		$	34,428		$	40,816		$	32,855		$	45,335		(22)		$	35,511		$	45,335		(22)
ACL - loans	148,502			136,925			132,805			102,532			99,620			49		148,502			99,620			49

Net charge-offs (recoveries)	1,134			(1,069)			2,978			248			551					3,043			(210)
ACL - loans to loans	1.00		%	0.94		%	0.93		%	0.87		%	0.89		%			1.00		%	0.89		%

Net charge-offs to average loans (4)	0.03			(0.03)			0.08			0.01			0.02					0.03			—
NPAs to total assets	0.15			0.14			0.17			0.16			0.23					0.15			0.23











AT PERIOD END ($ in millions)
Loans	$	14,882		$	14,541		$	14,316		$	11,760		$	11,191		33		$	14,882		$	11,191		33
Investment securities	6,539			6,683			6,410			5,653			5,335			23		6,539			5,335			23
Total assets	23,688			24,213			24,374			20,947			19,481			22		23,688			19,481			22
Deposits	20,321			20,873			21,056			18,241			16,865			20		20,321			16,865			20
Shareholders’ equity	2,635			2,651			2,695			2,222			2,122			24		2,635			2,122			24
Common shares outstanding (thousands)	106,163			106,034			106,025			89,350			86,559			23		106,163			86,559			23

(1) Excludes merger-related and other charges. (2) Net income less preferred stock dividends, divided by average realized common equity, which excludes AOCI. (3) Excludes effect of acquisition related intangibles and associated amortization. (4) Annualized.


UNITED COMMUNITY BANKS, INC.
Table 1 (Continued) - Financial Highlights
Non-GAAP Performance Measures Reconciliation
(in thousands, except per share data)
	2022									2021						For the Nine Months Ended September 30,
	Third Quarter			Second Quarter			First Quarter			Fourth Quarter			Third Quarter			2022			2021
Noninterest expense reconciliation
Noninterest expenses (GAAP)	$	112,755		$	120,790		$	119,275		$	109,156		$	96,749		$	352,820		$	287,483
Merger-related and other charges	(1,746)			(7,143)			(9,016)			(9,912)			(1,437)			(17,905)			(4,058)
Noninterest expenses - operating	$	111,009		$	113,647		$	110,259		$	99,244		$	95,312		$	334,915		$	283,425

Net income reconciliation
Net income (GAAP)	$	81,161		$	66,842		$	48,019		$	52,019		$	73,816		$	196,022		$	217,782
Merger-related and other charges	1,746			7,143			9,016			9,912			1,437			17,905			4,058
Income tax benefit of merger-related and other charges	(385)			(1,575)			(1,963)			(2,265)			(328)			(3,923)			(909)


Net income - operating	$	82,522		$	72,410		$	55,072		$	59,666		$	74,925		$	210,004		$	220,931

Diluted income per common share reconciliation
Diluted income per common share (GAAP)	$	0.74		$	0.61		$	0.43		$	0.55		$	0.82		$	1.78		$	2.42
Merger-related and other charges, net of tax	0.01			0.05			0.07			0.09			0.01			0.13			0.03


Diluted income per common share - operating	$	0.75		$	0.66		$	0.50		$	0.64		$	0.83		$	1.91		$	2.45

Book value per common share reconciliation
Book value per common share (GAAP)	$	23.78		$	23.96		$	24.38		$	23.63		$	23.25		$	23.78		$	23.25
Effect of goodwill and other intangibles	(7.26)			(7.28)			(7.30)			(5.21)			(4.57)			(7.26)			(4.57)
Tangible book value per common share	$	16.52		$	16.68		$	17.08		$	18.42		$	18.68		$	16.52		$	18.68

Return on tangible common equity reconciliation
Return on common equity (GAAP)	11.02		%	9.31		%	6.80		%	9.32		%	14.26		%	9.08		%	14.55		%
Merger-related and other charges, net of tax	0.19			0.79			1.03			1.42			0.22			0.67			0.22


Return on common equity - operating	11.21			10.10			7.83			10.74			14.48			9.75			14.77
Effect of goodwill and other intangibles	4.39			4.10			3.17			3.19			3.75			3.89			3.78
Return on tangible common equity - operating	15.60		%	14.20		%	11.00		%	13.93		%	18.23		%	13.64		%	18.55		%

Return on assets reconciliation
Return on assets (GAAP)	1.32		%	1.08		%	0.78		%	0.96		%	1.48		%	1.06		%	1.52		%
Merger-related and other charges, net of tax	0.02			0.09			0.11			0.14			0.02			0.07			0.02


Return on assets - operating	1.34		%	1.17		%	0.89		%	1.10		%	1.50		%	1.13		%	1.54		%

Efficiency ratio reconciliation
Efficiency ratio (GAAP)	48.41		%	56.58		%	57.43		%	62.12		%	53.11		%	53.94		%	53.72		%
Merger-related and other charges	(0.75)			(3.35)			(4.34)			(5.64)			(0.78)			(2.74)			(0.75)
Efficiency ratio - operating	47.66		%	53.23		%	53.09		%	56.48		%	52.33		%	51.20		%	52.97		%

Tangible common equity to tangible assets reconciliation
Equity to total assets (GAAP)	11.12		%	10.95		%	11.06		%	10.61		%	10.89		%	11.12		%	10.89		%
Effect of goodwill and other intangibles	—			(2.96)			(2.94)			(2.06)			(1.87)			—			(1.87)

Effect of preferred equity	(3.42)			(0.40)			(0.40)			(0.46)			(0.49)			(3.42)			(0.49)
Tangible common equity to tangible assets	7.70		%	7.59		%	7.72		%	8.09		%	8.53		%	7.70		%	8.53		%

Net Interest Revenue

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

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

For the quarter:

The increase in net interest revenue was primarily driven by the $3.45 billion increase in average loans provided by the addition of the Aquesta and Reliant loan portfolios, as well as organic growth. As a result of this increase and the rising rate environment, loan interest revenue (FTE) increased $46.0 million compared to the third quarter of 2021, which was partially offset by $13.4 million less in PPP interest and fee income and $3.37 million less in purchased loan accretion. Additionally, the increase in average securities of $1.91 billion combined with rising rates provided $18.5 million more in interest revenue (FTE) compared to the same period of last year as we have continued to deploy surplus liquidity into the securities portfolio. Compared to the third quarter of 2021, average interest-bearing deposits increased $2.13 billion and deposit interest expense increased $6.74 million. Growth in deposits includes deposits received in the acquisitions of Aquesta and Reliant. The increase in deposit interest expense was driven both by the deposit growth and the 20 basis point increase in the average rate paid on interest-bearing deposits resulting from the rising interest rate environment.

Our net interest spread and net interest margin for the third quarter of 2022 increased 37 and 45 basis points, respectively, compared to the third quarter of 2021, which was primarily a result of the impact of the rising rate environment on our asset-sensitive balance sheet as rates on interest-earning assets increased more quickly than rates paid on interest-bearing deposits. As discussed above, we had significantly less accelerated PPP interest and fees and purchased loan accretion compared to the third quarter of 2021. As a result, the average rate earned on loans, net interest spread and net interest margin for the third quarter of 2021 were more positively impacted by these sources of interest revenue compared to the same period of 2022, which partially offset the impact of the increase in interest rates since the third quarter 2021.

For the nine months ended:

Net interest revenue for the first nine months of 2022 was $542 million, representing a 32% increase from the first nine months of 2021, which was primarily driven by the same factors impacting the quarter. During the first nine months of 2022, our net interest spread and net interest margin both increased by 8 basis points compared to the same period of 2021. As with the quarter, the positive impact of the rising interest rate environment on our average rate earned on loans, net interest spread and net interest margin was partially offset by the significant decreases in accelerated PPP deferred fee accretion and interest income and purchased loan accretion of $36.1 million and $7.99 million, respectively, compared to the nine months ended September 30, 2021.


Table 2 - Average Consolidated Balance Sheets and Net Interest Analysis
For the Three Months Ended September 30,
(dollars in thousands, FTE)


	2022						2021
	Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate
Assets:
Interest-earning assets:
Loans, net of unearned income (FTE) (1)(2)	$	14,658,397	$	174,168	4.71	%	$	11,204,653	$	128,185	4.54	%
Taxable securities (3)	6,539,615		34,385		2.10		4,738,860		16,260		1.37
Tax-exempt securities (FTE) (1)(3)	493,115		3,449		2.80		383,196		3,061		3.20
Federal funds sold and other interest-earning assets	614,755		3,106		2.00		1,751,222		1,185		0.27
Total interest-earning assets (FTE)	22,305,882		215,108		3.83		18,077,931		148,691		3.27

Noninterest-earning assets:
Allowance for credit losses	(138,907)						(111,952)
Cash and due from banks	231,376						124,360
Premises and equipment	290,768						228,556
Other assets (3)	1,261,236						1,002,810
Total assets	$	23,950,355					$	19,321,705

Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Interest-bearing deposits:
NOW and interest-bearing demand	$	4,335,619	3,992		0.37		$	3,594,670	1,290		0.14
Money market	4,849,705		4,503		0.37		4,010,720		1,119		0.11
Savings	1,515,350		178		0.05		1,120,843		55		0.02
Time	1,635,580		984		0.24		1,466,821		609		0.16
Brokered time deposits	51,530		223		1.72		63,917		69		0.43
Total interest-bearing deposits	12,387,784		9,880		0.32		10,256,971		3,142		0.12

Federal funds purchased and other borrowings	3,442		27		3.11		—		—		—
Federal Home Loan Bank advances	—		—		—		54		—		—
Long-term debt	324,444		4,206		5.14		257,139		3,494		5.39
Total borrowed funds	327,886		4,233		5.12		257,193		3,494		5.39
Total interest-bearing liabilities	12,715,670		14,113		0.44		10,514,164		6,636		0.25

Noninterest-bearing liabilities:
Noninterest-bearing deposits	8,176,987						6,379,969
Other liabilities	349,647						308,551
Total liabilities	21,242,304						17,202,684
Shareholders' equity	2,708,051						2,119,021
Total liabilities and shareholders' equity	$	23,950,355					$	19,321,705

Net interest revenue (FTE)			$	200,995					$	142,055
Net interest-rate spread (FTE)					3.39	%					3.02	%
Net interest margin (FTE) (4)					3.57	%					3.12	%

(1)Interest revenue on tax-exempt securities and loans has been increased to reflect comparable interest on taxable securities and loans. The rate used was 26%, reflecting the statutory federal income tax rate and the federal tax adjusted state income tax rate.

(2)Included in the average balance of loans outstanding are loans on which the accrual of interest has been discontinued and loans that are held for sale.

(3)Unrealized gains and losses on securities, including those related to the transfer from AFS to HTM, have been reclassified to other assets. Pretax unrealized losses of $318 million and pretax unrealized gains of $39.6 million in 2022 and 2021, respectively, are included in other assets for purposes of this presentation.

(4)Net interest margin is taxable equivalent net interest revenue divided by average interest-earning assets.


Table 3 - Average Consolidated Balance Sheets and Net Interest Analysis
For the Nine Months Ended September 30,


	2022						2021
(dollars in thousands, fully taxable equivalent (FTE))	Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate
Assets:
Interest-earning assets:
Loans, net of unearned income (FTE) (1)(2)	$	14,426,470	$	475,989	4.41	%	$	11,417,285	$	380,765	4.46	%
Taxable securities (3)	6,274,230		83,281		1.77		4,206,099		44,845		1.42
Tax-exempt securities (FTE) (1)(3)	498,177		10,425		2.79		381,323		8,979		3.14
Federal funds sold and other interest-earning assets	1,271,287		6,192		0.65		1,468,487		3,462		0.31
Total interest-earning assets (FTE)	22,470,164		575,887		3.43		17,473,194		438,051		3.35

Non-interest-earning assets:
Allowance for loan losses	(129,278)						(127,793)
Cash and due from banks	200,463						138,973
Premises and equipment	284,850						225,021
Other assets (3)	1,308,647						1,007,669
Total assets	$	24,134,846					$	18,717,064

Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Interest-bearing deposits:
NOW and interest-bearing demand	$	4,520,079	7,624		0.23		$	3,452,206	4,158		0.16
Money market	4,992,357		7,030		0.19		3,853,907		4,278		0.15
Savings	1,483,169		337		0.03		1,064,045		157		0.02
Time	1,688,250		2,009		0.16		1,551,934		3,096		0.27
Brokered time deposits	65,133		313		0.64		67,794		292		0.58
Total interest-bearing deposits	12,748,988		17,313		0.18		9,989,886		11,981		0.16
Federal funds purchased and other borrowings	1,383		27		2.61		41		—		—
Federal Home Loan Bank advances	—		—		—		1,117		2		0.24
Long-term debt	322,600		12,515		5.19		286,347		11,564		5.40
Total borrowed funds	323,983		12,542		5.18		287,505		11,566		5.38
Total interest-bearing liabilities	13,072,971		29,855		0.31		10,277,391		23,547		0.31

Noninterest-bearing liabilities:
Noninterest-bearing deposits	7,958,392						6,059,680
Other liabilities	375,182						311,749
Total liabilities	21,406,545						16,648,820
Shareholders' equity	2,728,301						2,068,244
Total liabilities and shareholders' equity	$	24,134,846					$	18,717,064

Net interest revenue (FTE)			$	546,032					$	414,504
Net interest-rate spread (FTE)					3.12	%					3.04	%
Net interest margin (FTE) (4)					3.25	%					3.17	%

(2)Included in the average balance of loans outstanding are loans on which the accrual of interest has been discontinued and loans that are held for sale.

(3)Unrealized gains and losses, including those related to the transfer from AFS to HTM, have been reclassified to other assets. Pretax unrealized losses of $221 million in 2022 and pretax unrealized gains of $40.3 million in 2021, respectively, are included in other assets for purposes of this presentation.

(4)Net interest margin is taxable equivalent net-interest revenue divided by average interest-earning assets.

The following table shows the relative effect on net interest revenue for changes in the average outstanding amounts (volume) of interest-earning assets and interest-bearing liabilities and the rates earned and paid on such assets and liabilities (rate). Variances resulting from a combination of changes in rate and volume are allocated in proportion to the absolute dollar amounts of the change in each category.


Table 4 - Change in Interest Revenue and Expense on a Taxable Equivalent Basis
(in thousands)


	Three Months Ended September 30, 2022						Nine Months Ended September 30, 2022
	Compared to 2021 Increase (Decrease) Due to Changes in
	Volume		Rate		Total		Volume		Rate		Total
Interest-earning assets:
Loans (FTE)	$	40,867	$	5,116	$	45,983	$	99,327	$	(4,103)	$	95,224
Taxable securities	7,549		10,576		18,125		25,655		12,781		38,436
Tax-exempt securities (FTE)	802		(414)		388		2,527		(1,081)		1,446
Federal funds sold and other interest-earning assets	(1,220)		3,141		1,921		(522)		3,252		2,730
Total interest-earning assets (FTE)	47,998		18,419		66,417		126,987		10,849		137,836

Interest-bearing liabilities:
NOW and interest-bearing demand accounts	314		2,388		2,702		1,511		1,955		3,466
Money market accounts	279		3,105		3,384		1,441		1,311		2,752
Savings deposits	25		98		123		76		104		180
Time deposits	76		299		375		252		(1,339)		(1,087)
Brokered deposits	(16)		170		154		(12)		33		21
Total interest-bearing deposits	678		6,060		6,738		3,268		2,064		5,332

Federal funds purchased & other borrowings	14		13		27		14		13		27
FHLB advances	—		—		—		(1)		(1)		(2)
Long-term debt	879		(167)		712		1,420		(469)		951
Total borrowed funds	893		(154)		739		1,433		(457)		976
Total interest-bearing liabilities	1,571		5,906		7,477		4,701		1,607		6,308

Increase in net interest revenue (FTE)	$	46,427	$	12,513	$	58,940	$	122,286	$	9,242	$	131,528

Provision for Credit Losses

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

We recorded a provision for credit losses of $15.4 million and $44.1 million for the three and nine months ended September 30, 2022, respectively, compared to a release of provision of $11.0 million and $36.9 million, respectively, for the same periods of 2021. The amount of provision recorded in each period was the amount required such that the total ACL reflected the appropriate balance as determined by management reflecting expected life of loan losses. The provision recorded during the third quarter of 2022 reflected a less favorable economic outlook as of September 30, 2022 compared to that of the prior quarter and prior year. The provision for credit losses during the nine months ended September 30, 2022 included the initial provision for credit losses on Reliant’s non-PCD loans and unfunded commitments of $15.2 million and $3.12 million, respectively. The negative provision expense for the three and nine months ended September 30, 2021 was primarily a result of an improved economic forecast combined with low net charge-offs for the third quarter of 2021 and net recoveries for the nine months ended September 30, 2021.

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

Noninterest income

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


Table 5 - Noninterest Income
(in thousands)


	Three Months Ended September 30,				Change				Nine Months Ended September 30,				Change
	2022		2021		Amount		Percent		2022		2021		Amount		Percent
Overdraft fees	$	2,778	$	2,858	$	(80)	(3)	%	$	8,038	$	7,474	$	564	8	%
ATM and debit card fees	3,857		3,867		(10)		—		12,038		10,263		1,775		17
Other service charges and fees	2,934		2,625		309		12		8,568		7,518		1,050		14
Total service charges and fees	9,569		9,350		219		2		28,644		25,255		3,389		13
Mortgage loan gains and related fees	6,297		13,828		(7,531)		(54)		29,420		47,536		(18,116)		(38)
Wealth management fees	5,879		5,554		325		6		17,759		12,881		4,878		38
Gains on sales of other loans	2,228		2,353		(125)		(5)		9,226		7,506		1,720		23
Lending and loan servicing fees	2,946		2,825		121		4		7,518		7,070		448		6
Securities gains (losses), net	—		—		—				(3,688)		41		(3,729)
Other noninterest income:
Customer derivatives	470		585		(115)		(20)		1,790		2,537		(747)		(29)
Other investment gains (losses)	(1,492)		1,333		(2,825)				(3,333)		4,487		(7,820)
BOLI	2,020		832		1,188		143		5,241		2,661		2,580		97
Treasury management income	1,022		765		257		34		2,739		2,120		619		29
Other	2,983		2,670		313		12		9,037		8,547		490		6
Total other noninterest income	5,003		6,185		(1,182)		(19)		15,474		20,352		(4,878)		(24)
Total noninterest income	$	31,922	$	40,095	$	(8,173)	(20)		$	104,353	$	120,641	$	(16,288)	(14)

The increase in total service charges and fees was primarily driven by the acquisitions of Aquesta and Reliant since the third quarter of 2021, in addition to increases in organic transaction volume. However, the impact of the acquisitions on overdraft fees for the three and nine months ended September 30, 2022 was offset by the impact of updates to our consumer overdraft policy implemented in the fourth quarter of 2021. The policy updates included the addition of a fee forgiveness feature, an increase to the overdraft threshold and a lower daily fee item limit.

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

The decrease in mortgage loan gains and related fees was primarily a result of tapering mortgage refinance and mortgage rate lock demand compared to the same periods of 2021, as reflected in the following table. In addition, we held more of our mortgage production in portfolio in comparison to 2021, which contributed to the decrease in volume of loans sold. During the three and nine months ended September 30, 2022, we recorded $2.45 million and $10.9 million in positive fair value adjustments to the mortgage servicing rights asset, which partially offset the decrease in mortgage loan gains. In comparison, we recorded a negative fair value adjustment to the mortgage servicing rights asset of $146,000 and a positive adjustment of $1.33 million for the three and nine months ended September 30, 2021.


Table 6 - Selected Mortgage Metrics
(dollars in thousands)
	Three Months Ended September 30,						Nine Months Ended September 30,
	2022		2021		% Change		2022		2021		% Change
Mortgage rate locks	$	456,186	$	730,566	(38)	%	$	1,810,839	$	2,425,571	(25)	%
# of mortgage rate locks	1,213		2,077		(42)		4,622		7,149		(35)

Mortgage loans sold	$	93,183	$	319,232	(71)		$	460,232	$	1,062,373	(57)
# of mortgage loans sold	379		1,299		(71)		1,812		4,408		(59)

Mortgage loans originated:
Purchases	$	269,743	$	354,378	(24)		$	977,562	$	1,053,849	(7)
Refinances	47,533		214,018		(78)		300,128		849,421		(65)
Total	$	317,276	$	568,396	(44)		$	1,277,690	$	1,903,270	(33)

# of mortgage loans originated	841		1,615		(48)		3,243		5,749		(44)

The increase in wealth management fees for the first nine months of 2022 compared to the same period of 2021 resulted primarily from inclusion of FinTrust’s wealth management business for the full year of 2022. Assets under administration totaled $4.00 billion as of September 30, 2022.

During the first quarter of 2022, we sold certain lower-yielding securities with the strategic intent of reinvesting in higher-yielding securities, which resulted in securities losses for the nine months ended September 30, 2022.

Our SBA/USDA lending strategy includes selling a portion of the loan production each quarter. The amount of loans sold depends on several variables including the current lending environment and balance sheet management activities. During the third quarter and first nine months of 2022, we sold more SBA/USDA loans compared to the same period of last year. From time to time, we also sell certain equipment financing receivables. The following table presents loans sold and the corresponding gains or losses recognized on the sale for the periods indicated.


Table 7 - Other Loan Sales
(in thousands)
	Three Months Ended September 30,								Nine Months Ended September 30,
	2022				2021				2022				2021
	Loans Sold		Gain		Loans Sold		Gain		Loans Sold		Gain		Loans Sold		Gain
Guaranteed portion of SBA/USDA loans	$	20,405	$	1,535	$	13,484	$	1,492	$	87,867	$	7,108	$	57,132	$	5,835
Equipment financing receivables	21,557		693		19,273		861		65,534		2,118		39,240		1,671
Total	$	41,962	$	2,228	$	32,757	$	2,353	$	153,401	$	9,226	$	96,372	$	7,506

The change in other noninterest income for the three and nine months ended September 30, 2022 compared to the same periods of 2021 was primarily driven by the following factors:

•Customer derivative income for the nine months ended September 30, 2022 decreased due to rising interest rates negatively impacting the demand for customer derivative products. This was partially offset by improvements in the CVA on customer derivatives. The CVA improved due to rising interest rates, which lowered our overall credit exposure on customer derivative positions, and credit upgrades to underlying loans associated with customer derivative positions.

•We recorded unrealized losses on our other investments, which includes deferred compensation plan assets, CRA and tax credit investments and other equity securities, compared to unrealized gains during the same periods of 2021.

•The increase in BOLI income reflects income earned on BOLI policies acquired with Reliant as well as death benefit gains recognized in the second and third quarters of 2022 totaling $1.37 million.

Noninterest Expenses

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


Table 8 - Noninterest Expenses
(in thousands)


	Three Months Ended September 30,				Change				Nine Months Ended September 30,				Change
	2022		2021		Amount		Percent		2022		2021		Amount		Percent
Salaries and employee benefits	$	67,823	$	60,458	$	7,365	12	%	$	208,062	$	180,457	$	27,605	15	%
Communications and equipment	8,795		7,368		1,427		19		27,718		21,979		5,739		26
Occupancy	9,138		7,096		2,042		29		27,381		21,130		6,251		30
Advertising and public relations	2,544		1,458		1,086		74		6,332		4,150		2,182		53
Postage, printing and supplies	2,190		1,731		459		27		6,308		5,171		1,137		22
Professional fees	4,821		5,347		(526)		(10)		14,670		14,509		161		1
Lending and loan servicing expense	2,333		2,450		(117)		(5)		7,746		8,508		(762)		(9)
Outside services - electronic banking	3,159		2,308		851		37		8,629		6,811		1,818		27
FDIC assessments and other regulatory charges	2,356		1,723		633		37		6,796		5,520		1,276		23
Amortization of intangibles	1,678		1,028		650		63		5,207		2,942		2,265		77
Other	6,172		4,345		1,827		42		16,066		12,248		3,818		31
Total excluding merger-related and other charges	111,009		95,312		15,697		16		334,915		283,425		51,490		18
Merger-related and other charges	1,746		1,437		309				17,905		4,058		13,847

Total noninterest expenses	$	112,755	$	96,749	$	16,006	17		$	352,820	$	287,483	$	65,337	23

The increase in salaries and employee benefits for the third quarter and first nine months of 2022 compared to the same periods of 2021 was primarily driven by the addition of Reliant, Aquesta and FinTrust employees since their respective acquisition dates. The increase also reflects our annual merit-based salary increases awarded during the second quarter of 2022. These increases were partially offset by a reduction in deferred compensation expense resulting from unrealized losses on underlying plan assets, compared to unrealized gains in the same periods of 2021. Commissions expense also decreased primarily due to reduced mortgage production volume. Full-time equivalent headcount totaled 2,826 at September 30, 2022, up from 2,480 at September 30, 2021, which represents a 14% increase.

Communications and equipment expense increased primarily due to incremental software contract costs and the growth in our network with the addition of recent acquisitions. The increase in occupancy costs for the third quarter and first nine months of 2022 compared to the same periods of 2021 was mostly attributable to the additional operating lease costs associated with Reliant, Aquesta and FinTrust. Advertising and public relations expense increased compared to 2021 as a result of charitable contributions made to the United Community Bank Foundation, new marketing campaigns, promotions and sponsorships. In the third quarter of 2022, we made a $650,000 contribution to the United Community Bank Foundation. The increase in outside services - electronic banking primarily related to increased ATM network and internet banking costs. Amortization of intangibles increased with the additional customer deposit and customer relationship intangibles recorded as a result of acquisitions since the third quarter of 2021. The increase in other expense was primarily due to increase in travel and meals expenses, as well as volume-based increases in fraud losses. Increased merger-related charges for the nine months ended September 30, 2022 were primarily related to the acquisition of Reliant and the completion of its system conversion in the second quarter of 2022, as well as branch closure costs.

Balance Sheet Review

Total assets at September 30, 2022 and December 31, 2021 were $23.7 billion and $20.9 billion, respectively. Total liabilities at September 30, 2022 and December 31, 2021 were $21.1 billion and $18.7 billion, respectively. Shareholders’ equity totaled $2.63 billion and $2.22 billion at September 30, 2022 and December 31, 2021, respectively.

Loans

Our loan portfolio is our largest category of interest-earning assets. The following table presents a summary of the loan portfolio by loan type as of September 30, 2022, of which approximately 73% was secured by real estate. Commercial and industrial loans as of September 30, 2022 included $2.44 million of PPP loans.

Table 9 - Loan Portfolio Composition

As of September 30, 2022

Asset Quality and Risk Elements

We manage asset quality and control credit risk through review and oversight of the loan portfolio as well as adherence to policies designed to promote sound underwriting and loan monitoring practices. Our credit risk management function is responsible for monitoring asset quality and Board approved portfolio concentration limits, establishing credit policies and procedures and enforcing the consistent application of these policies and procedures.

We conduct reviews of special mention and substandard performing and non-performing loans, TDRs, past due loans and portfolio concentrations on a regular basis to identify risk migration and potential charges to the ACL. These items are discussed in a series of meetings attended by credit risk management leadership and leadership from various lending groups. In addition to the reviews mentioned above, an independent loan review team reviews the portfolio to ensure consistent application of risk rating policies and procedures.

The ACL reflects our assessment of the life of loan expected credit losses in the loan portfolio and unfunded loan commitments. This assessment involves uncertainty and judgment and is subject to change in future periods. The amount of any changes could be significant if our assessment of loan quality or collateral values changes substantially with respect to one or more loan relationships or portfolios. The allocation of the ACL is based on reasonable and supportable forecasts, historical data, subjective judgment and estimates and therefore, is not necessarily indicative of the specific amounts or loan categories in which charge-offs may ultimately occur. See the Critical Accounting Estimates section of MD&A in our 2021 10-K for additional information on the allowance for credit losses.

Table 10 - Allocation of ACL

(in thousands)



	September 30, 2022				December 31, 2021
	ACL			% of loans in each category to total loans	ACL			% of loans in each category to total loans
Owner occupied commercial real estate	$	19,056		18	$	14,282		20
Income producing commercial real estate	31,610			22	24,156			22
Commercial & industrial	20,918			15	16,592			16
Commercial construction	17,954			10	9,956			9
Equipment financing	20,565			9	16,290			9
Total commercial	110,103			74	81,276			76
Residential mortgage	19,335			14	12,390			14
HELOC	8,473			6	6,568			6
Residential construction	2,304			3	1,847			3
Manufactured housing	7,352			2	—			—
Consumer	935			1	451			1
Total ACL - loans	148,502			100	102,532			100
ACL - unfunded commitments	18,798				10,992
Total ACL	$	167,300			$	113,524

ACL - loans as a percentage of total loans	1.00		%		0.87		%

ACL - loans as a percentage of nonaccrual loans HFI	438				312

The increase in the ACL since December 31, 2021 was primarily driven by the acquisition of Reliant, which added $31.1 million to the ACL as of the acquisition date. Of this amount, $12.7 million was reclassified from the amortized cost basis of PCD loans, $15.2 million was recorded as provision for loan losses on acquired non-PCD loan balances and $3.12 million was recorded as provision for unfunded commitments on the acquired balance of unfunded commitments. The increase in the ACL was also attributable to a more negative economic forecast as of September 30, 2022 as compared to prior periods. See Provision for Credit Losses discussion within this MD&A for further information.

The following table presents a summary of net charge-offs to average loans for the periods indicated.


Table 11 - Net Charge-offs to Average Loans
(in thousands)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021






Net charge-offs (recoveries)
Owner occupied commercial real estate	$	(90)		$	(93)		$	(1,631)		$	571
Income producing commercial real estate	176			45			(230)			(130)
Commercial & industrial	(744)			(91)			1,883			(2,838)
Commercial construction	10			(123)			(507)			(394)
Equipment financing	1,121			512			2,295			2,324
Residential mortgage	(66)			51			(214)			(51)
HELOC	(102)			(102)			(529)			(287)
Residential construction	(109)			(37)			(208)			(130)
Manufactured housing	220			—			519			—
Consumer	718			389			1,665			725
Total net charge-offs (recoveries)	$	1,134		$	551		$	3,043		$	(210)

Average loans
Owner occupied commercial real estate	$	2,680,906		$	2,132,744		$	2,650,505		$	2,119,457
Income producing commercial real estate	3,274,246			2,526,727			3,291,809			2,555,933
Commercial & industrial	2,237,096			2,041,344			2,285,443			2,348,130
Commercial construction	1,508,481			929,760			1,487,598			945,175
Equipment financing	1,241,322			985,271			1,184,201			938,275
Residential mortgage	2,065,662			1,491,140			1,930,781			1,411,077
HELOC	813,637			656,067			791,673			671,006
Residential construction	400,680			302,466			382,549			286,394
Manufactured housing	292,648			—			278,449			—
Consumer	143,719			139,134			143,462			141,838
Total average loans	$	14,658,397		$	11,204,653		$	14,426,470		$	11,417,285

Net charge-offs to average loans (1)
Owner occupied commercial real estate	(0.01)		%	(0.02)		%	(0.08)		%	0.04		%
Income producing commercial real estate	0.02			0.01			(0.01)			(0.01)
Commercial & industrial	(0.13)			(0.02)			0.11			(0.16)
Commercial construction	—			(0.05)			(0.05)			(0.06)
Equipment financing	0.36			0.21			0.26			0.33
Residential mortgage	(0.01)			0.01			(0.01)			—
HELOC	(0.05)			(0.06)			(0.09)			(0.06)
Residential construction	(0.11)			(0.05)			(0.07)			(0.06)
Manufactured housing	0.30			—			0.25			—
Consumer	1.98			1.11			1.55			0.68
Total	0.03			0.02			0.03			—

(1) Annualized.

Nonperforming Assets

The table below summarizes NPAs for the periods indicated. NPAs include nonaccrual loans, OREO and repossessed assets,


Table 12 - NPAs
(in thousands)


	September 30, 2022			December 31, 2021
Nonaccrual loans HFI	33,879			32,812
Nonaccrual loans held for sale	316			—
OREO and repossessed assets	1,316			43
Total NPAs	$	35,511		$	32,855

Nonaccrual loans HFI as a percentage of total loans HFI	0.23		%	0.28		%

NPAs as a percentage of total assets	0.15			0.16

Our policy is to place loans on nonaccrual status when, in the opinion of management, the full principal and interest on a loan is not likely to be collected or when the loan becomes 90 days past due. A loan may continue on accrual after 90 days, however, if it is well collateralized and in the process of collection. When a loan is placed on nonaccrual status, interest previously accrued but not collected is reversed against current interest revenue. Interest payments received on nonaccrual loans are applied to reduce the loan’s amortized cost. Loans are generally returned to accrual status when all the principal and interest amounts contractually due are brought current, there is a sustained period of repayment performance and future payments are reasonably assured.

Generally, we do not commit to lend additional funds to customers whose loans are on nonaccrual status, although in certain isolated cases, we execute forbearance agreements whereby we agree to continue to fund construction loans to completion or other lines of credit as long as the borrower meets the conditions of the forbearance agreement. We may also fund other amounts necessary to protect collateral such as amounts to pay past due property taxes and insurance coverage.

At September 30, 2022 and December 31, 2021, we had $42.9 million and $52.4 million, respectively, in loans with terms that have been modified in TDRs. Included therein were $5.13 million and $11.5 million, respectively, of TDRs that were classified as nonaccrual and were included in nonperforming loans. The remaining TDRs with an aggregate balance of $37.8 million and $40.9 million, respectively, were performing according to their modified terms and were therefore not considered to be nonperforming assets.

Investment Securities

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

At September 30, 2022 and December 31, 2021, we had HTM debt securities with a carrying amount of $2.68 billion and $1.16 billion, respectively, and AFS debt securities totaling $3.86 billion and $4.50 billion, respectively. During the first nine months of 2022, United transferred AFS debt securities to HTM with a fair value on the transfer date of $1.29 billion, which included unrealized losses recorded in AOCI totaling $87.4 million. No securities were transferred from AFS to HTM during the third quarter of 2022. Transfer date unrealized losses are amortized and reclassified out of AOCI as a yield adjustment, which is offset by discount accretion of the transferred HTM securities. Amortization of transfer date unrealized losses and discount accretion are recognized over the remaining life of the securities. During the first half of 2022, we continued to deploy liquidity generated through strong deposit growth by purchasing additional investment securities. In the third quarter of 2022, we slowed our securities purchases as we began to see some deposit attrition, which absorbed much of our surplus liquidity. At September 30, 2022 and December 31, 2021, the securities portfolio represented approximately 28% and 27%, respectively, of total assets.

In accordance with CECL, our HTM debt securities portfolio is evaluated quarterly to assess whether an ACL is required. We measure expected credit losses on HTM debt securities on a collective basis by major security type. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. At September 30, 2022 and December 31, 2021, calculated credit losses on HTM debt securities were de minimis due to the high credit quality of the portfolio, which included securities issued or guaranteed by U.S. Government agencies, GSEs, high credit quality municipalities and supranational entities. As a result, no ACL for HTM debt securities was recorded.

For AFS debt securities in an unrealized loss position, if we intend to sell, or if it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis, the security's amortized cost basis is written down to fair value through income. Absent circumstances where an AFS security would be sold, we evaluate whether the decline in fair value has resulted from credit losses or other factors. The evaluation considers factors such as the extent to which fair value is less than amortized cost, changes to the security’s rating, and adverse conditions specific to the security. If the evaluation indicates a credit loss exists, an ACL may be recorded, with such allowance limited to the amount by which fair value is below amortized cost. Any impairment unrelated to credit factors is recognized in OCI. At September 30, 2022 and December 31, 2021, there was no ACL related to the AFS debt securities portfolio. Unrealized losses on fixed income securities at September 30, 2022 and December 31, 2021 primarily reflected the effect of changes in interest rates.

Goodwill and Other Intangible Assets

Goodwill represents the premium paid for acquired companies above the net fair value of the assets acquired and liabilities assumed, including separately identifiable intangible assets. Management evaluates goodwill annually, or more frequently if necessary, to determine if any impairment exists. At September 30, 2022 and December 31, 2021, the net carrying amount of goodwill was $751 million and $452 million, respectively.

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

In connection with the acquisition of Reliant in the first quarter of 2022, we recorded goodwill and a core deposit intangible of $299 million and $14.5 million, respectively.

Deposits

Customer deposits are the primary source of funds for the continued growth of our earning assets. Our high level of service, as evidenced by our strong customer satisfaction scores, has been instrumental in attracting and retaining customer deposit accounts. The increase in deposits since December 31, 2021 is mostly driven by the deposits assumed in the Reliant transaction. More recently, we have seen some anticipated balance attrition, mostly in NOW and money market accounts, as rising interest rates have given customers more attractive returns outside of the banking system. Much of the recent decrease in balances is in public funds deposits.


Table 13 - Deposits
(in thousands)


	September 30, 2022		December 31, 2021
Noninterest-bearing demand	$	8,198,129	$	6,956,981
NOW and interest-bearing demand	4,208,731		4,252,209
Money market and savings	6,147,066		5,399,133
Time	1,622,608		1,442,498
Total customer deposits	20,176,534		18,050,821
Brokered deposits	144,608		190,358
Total deposits	$	20,321,142	$	18,241,179

Borrowing Activities

At September 30, 2022 and December 31, 2021, we had long-term debt outstanding of $325 million and $247 million, respectively, which includes senior debentures, subordinated debentures, and trust preferred securities. The increase since December 31, 2021 is a result of the subordinated debt and trust preferred securities assumed in the Reliant acquisition totaling $76.7 million. See Note 9 to the consolidated financial statements for further details.

Contractual Obligations

There have not been any material changes to our contractual obligations since December 31, 2021.

Off-Balance Sheet Arrangements

We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of customers. These financial instruments include commitments to extend credit, letters of credit and financial guarantees.

A commitment to extend credit is an agreement to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Letters of credit and financial guarantees are conditional commitments issued to guarantee a customer’s performance to a third party and have essentially the same credit risk as extending loan facilities to customers. Those commitments are primarily issued to local businesses.

The exposure to credit loss in the event of nonperformance by the other party to the commitments to extend credit, letters of credit and financial guarantees is represented by the contractual amount of these instruments. We use the same credit underwriting procedures for making commitments, letters of credit and financial guarantees, as we use for underwriting on-balance sheet instruments. Management evaluates each customer’s creditworthiness on a case-by-case basis and the amount of the collateral, if deemed necessary, is based on the credit evaluation. Collateral held varies, but may include unimproved and improved real estate, certificates of deposit, personal property or other acceptable collateral.

All of these instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet. The total amount of these instruments does not necessarily represent future cash requirements because a significant portion of these instruments expire without being used. We are not involved in off-balance sheet contractual relationships, other than those disclosed in this report, that could result in liquidity needs or other commitments, or that could significantly affect earnings. See Note 22 to the consolidated financial statements included in our 2021 10-K and Note 15 to the consolidated financial statements in this Report for additional information on off-balance sheet arrangements.

Interest Rate Sensitivity Management

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

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

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

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


Table 14 - Interest Sensitivity
(in thousands)


	Increase (Decrease) in Net Interest Revenue from Base Scenario at
	September 30, 2022				December 31, 2021
Change in Rates	Shock		Ramp		Shock		Ramp
200 basis point increase	8.65	%	5.33	%	8.02	%	4.76	%
100 basis point increase	4.45		3.60		3.87		3.07
100 basis point decrease	(5.21)		(4.17)		(4.45)		(3.80)
200 basis point decrease	(12.45)		(7.46)		(5.54)		(4.51)

Interest rate sensitivity is a function of the repricing characteristics of the portfolio of assets and liabilities. These 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, repricing or maturity. Interest rate sensitivity management focuses on the maturity structure of assets and liabilities and their 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.

We have discretion in the extent and timing of deposit repricing depending upon the competitive pressures in the markets in which 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 repricing for both the asset and the liability remains the same, due to the two instruments 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 we pay a variable rate (or fixed rate, as the case may be) and 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 OCI. 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. 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.

Our policy requires all non-customer derivative financial instruments be used only for asset/liability management through the hedging of specific transactions, positions or 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 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, our primary goal is to maintain a sufficient level of liquidity in all expected economic environments. To assist in determining the adequacy of our liquidity, we perform a variety of liquidity stress tests. We maintain an unencumbered liquid asset reserve to help ensure our ability to meet our obligations under normal conditions for at least a 12-month period and under severely adverse liquidity conditions for a minimum of 30 days.

An important part of the Bank’s liquidity resides in the asset portion of the balance sheet, which provides liquidity primarily through loan interest and principal repayments and the maturities and sales of securities, as well as the ability to use these assets as collateral for borrowings on a secured basis.

The Bank’s main source of liquidity is customer interest-bearing and noninterest-bearing deposit accounts. Liquidity is also available from wholesale funding sources consisting primarily of Federal funds purchased, FHLB advances, and brokered deposits. These

sources of liquidity are generally short-term in nature and are used as necessary to fund asset growth and meet other short-term liquidity needs.

In addition, because the Holding Company is a separate entity and apart from the Bank, it must provide for its own liquidity. The Holding Company is responsible for the payment of dividends declared for its common and preferred shareholders, and interest and principal on any outstanding debt or trust preferred securities. The Holding Company currently has internal capital resources to meet these obligations. While the Holding Company has access to the capital markets and maintains a line of credit as a contingent funding source, the ultimate sources of its liquidity are subsidiary service fees and dividends from the Bank, which are limited by applicable law and regulations. A South Carolina state-chartered bank is permitted to pay a dividend of up to 100% of its current year earnings without requesting approval of the South Carolina Board of Financial Institutions, provided certain conditions are met. Holding Company liquidity is managed to a minimum of 15-months of anticipated cash expenditures after considering all of its liquidity needs over this period.

At September 30, 2022, we had sufficient qualifying collateral to provide borrowing capacity for FHLB advances of $1.54 billion and Federal Reserve discount window borrowing capacity of $2.44 billion. We also had unpledged investment securities of $4.58 billion that could be used as collateral for additional borrowings. In addition, we have the ability to attract retail deposits by competing more aggressively on pricing.

Significant uses and sources of cash during the nine months ended September 30, 2022 are as follows. See the consolidated statement of cash flows for further detail.

•Net cash provided by operating activities of $508 million reflects net income of $196 million adjusted for non-cash transactions, gains and losses on sales of securities and other loans, a decrease in loans held for sale of $136 million and changes in other assets and liabilities. Significant non-cash transactions for the period included a $44.1 million provision for credit losses and net depreciation, amortization, and accretion of $34.7 million.

•Net cash used in investing activities of $1.84 billion primarily consisted of purchases of AFS and HTM debt securities of $1.99 billion and a net increase in loans of $773 million, partially offset by proceeds from securities sales, maturities and calls of $916 million.

•Net cash used in financing activities of $499 million was driven by a net decrease in deposits of $424 million, combined with dividends on common and preferred stock of $68.4 million.

In the opinion of management, our liquidity position at September 30, 2022 was sufficient to meet our expected cash flow requirements for the foreseeable future.

Capital Resources and Dividends

Shareholders’ equity at September 30, 2022 was $2.63 billion, an increase of $412 million from December 31, 2021 primarily due to equity issued in the Reliant acquisition and year-to-date earnings partially offset by dividends declared and unrealized losses on AFS debt securities.

The following table shows capital ratios, as calculated under applicable regulatory guidelines, at September 30, 2022 and December 31, 2021. As of September 30, 2022, capital levels remained characterized as “well-capitalized” under regulatory requirements in effect at the time. Additional information related to capital ratios is provided in Note 14 to the consolidated financial statements.


Table 15 - Capital Ratios


							United Community Banks, Inc. (Consolidated)				United Community Bank
	Minimum		Well- Capitalized		Minimum Capital Plus Capital Conservation Buffer		September 30, 2022		December 31, 2021		September 30, 2022		December 31, 2021
Risk-based ratios:
CET1 capital	4.5	%	6.5	%	7.0	%	12.13	%	12.46	%	12.94	%	12.87	%
Tier 1 capital	6.0		8.0		8.5		12.68		13.17		12.94		12.87
Total capital	8.0		10.0		10.5		14.62		14.65		13.75		13.46
Leverage ratio	4.0		5.0		N/A		9.41		8.75		9.58		8.53

Effect of Inflation and Changing Prices

A bank’s asset and liability structure is substantially different from that of an industrial firm in that primarily all assets and liabilities of a bank are monetary in nature with relatively little investment in fixed assets or inventories. Inflation has an important effect on the growth of total assets and the resulting need to increase equity capital at higher than normal rates in order to maintain an appropriate equity to assets ratio.

Management believes the effect of inflation on financial results depends on our ability to react to changes in interest rates, and by such reaction, reduce the inflationary effect on performance. We have an asset/liability management program to manage interest rate sensitivity. In addition, periodic reviews of banking services and products are conducted to adjust pricing in view of current and expected costs.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

There have been no material changes in our market risk as of September 30, 2022 from that presented in our 2021 10-K. Our interest rate sensitivity position at September 30, 2022 is set forth in Table 14 in MD&A of this Report and incorporated herein by this reference.

Item 4. Controls and Procedures

(a) Disclosure Controls and Procedures. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures (as such term is defined in Exchange Act Rule 13a-15(e)) as of September 30, 2022. Based on that evaluation, our principal executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

(b) Changes in Internal Control Over Financial Reporting. No change in our internal control over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)) occurred during the fiscal quarter ended September 30, 2022 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

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

Items 1A. Risk Factors

Except with respect to the additional risk factors related to the proposed Progress acquisition, which are set forth in the final prospectus filed with the SEC pursuant to Rule 424(b)(3) on July 12, 2022 (and incorporated herein by this reference), there have been no material changes to the risk factors previously disclosed in the 2021 10-K.

Item 5. Other Information

On November 1, 2022, the Talent and Compensation Committee of the Board (the “Committee”) approved the termination of the change in control severance agreements between the Holding Company and its executive officers, including H. Lynn Harton, Jefferson L. Harralson, Richard W. Bradshaw, Robert A. Edwards and Melinda Davis Lux after a review process that determined the agreements were outdated in several respects. The current form of the Holding Company’s change in control agreements, which was originally adopted for the Holding Company’s executive officers in March of 2015, provided severance benefits to the Holding Company’s executive officers in the event of a termination of employment for specified reasons in connection with a change in control of the Holding Company. The review of the agreements was undertaken by the Committee in the ordinary course of reviewing compensation arrangements applicable to the Holding Company’s executive officers. The Committee is in the process of considering the development of new change in control agreements for the Holding Company’s executive officers, which the Committee would anticipate implementing in the coming months. In connection with the termination of the change in control agreements, each of the executive officers entered into a letter agreement agreeing thereto.

The foregoing description of the change in control agreement termination letter agreement is qualified in its entirety by the terms of such letter, the form of which is filed as Exhibit 10.1 hereto and incorporated herein by reference.

Item 6. Exhibits

(d) Exhibits. See Exhibit Index below.


EXHIBIT INDEX

Exhibit No.						Description



3.1						Restated Articles of Incorporation of United Community Banks, Inc. as amended through August 13, 2021 (incorporated herein by reference to Exhibit 3.1 to United Community Bank Inc.'s Quarterly Report on Form 10-Q for the period ended September 30, 2021, filed on November 5, 2021.

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						Form of Change in Control Agreement Termination Letter Agreement, dated November 1, 2022, between United Community Banks, Inc. and each of H. Lynn Harton, Jefferson L. Harralson, Richard W. Bradshaw, Robert A. Edwards, Melinda Davis Lux, Mark A. Terry and Holly N. Berry .



31.1						Certification by H. Lynn Harton, President and Chief Executive Officer of United Community Banks, Inc., pursuant to Exchange Act Rule 13a-14(a).

31.2						Certification by Jefferson L. Harralson, Executive Vice President and Chief Financial Officer of United Community Banks, Inc., pursuant to Exchange Act Rule 13a-14(a).

32						Certification of CEO and CFO pursuant to 18 U.S.C. Section 1350.

101						Interactive data files for United Community Bank, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, formatted in Inline XBRL: (i) the Consolidated Balance Sheets (unaudited); (ii) the Consolidated Statements of Income (unaudited); (iii) the Consolidated Statements of Comprehensive Income (unaudited); (iv) the Consolidated Statements in Shareholders’ Equity (unaudited); (v) the Consolidated Statements of Cash Flows (unaudited); and (vi) the Notes to Consolidated Financial Statements (unaudited).













104						The cover page from United Community Bank’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 (formatted in Inline XBRL and included in Exhibit 101)

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: November 4, 2022