UNITED COMMUNITY BANKS INC - Quarter Report: 2023 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, 2023

☐

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 118,979,851 shares of the registrant’s common stock, par value $1 per share, outstanding as of October 31, 2023.

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	40

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	60

	Item 4.	Controls and Procedures	60

PART II - Other Information

	Item 1.	Legal Proceedings	61

	Item 1A.	Risk Factors	61

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	61




	Item 6.	Exhibits	62

Glossary of Defined Terms

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


Term						Definition
2022 10-K						United’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 24, 2023
ACL						Allowance for credit losses
AFS						Available-for-sale
ALCO						Asset/Liability Management Committee
AOCI						Accumulated other comprehensive income (loss)


ARR						Alternative reference rate
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
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
FDM						Modification made to borrowers experiencing financial difficulty
Federal Reserve						Federal Reserve System
First Miami						First Miami Bancorp, Inc. and its wholly-owned subsidiary, First National Bank of South Miami
FHLB						Federal Home Loan Bank
FOMC						Federal Reserve’s Federal Open Markets Committee
FTE						Fully taxable equivalent
GAAP						Accounting principles generally accepted in the United States of America
GSE						U.S. government-sponsored enterprise


Holding Company						United Community Banks, Inc. on an unconsolidated basis
HTM						Held-to-maturity
LIBOR						London Interbank Offered Rate
LIHTC						Low- income housing tax credit
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
Progress						Progress Financial Corporation and its wholly-owned subsidiary, Progress Bank & Trust
Reliant						Reliant Bancorp, Inc. and its wholly-owned subsidiary, Reliant Bank
Report						Quarterly Report on Form 10-Q for the quarterly period ending September 30, 2023
SBA						United States Small Business Administration

SEC						Securities and Exchange Commission
SOFR						Secured Overnight Financing Rate


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
VIE						Variable interest entity

Cautionary Note Regarding Forward-looking Statements

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

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

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

•changes in loan underwriting, credit review or loss policies associated with economic conditions, examination conclusions or regulatory developments;

•the potential effects of pandemics or public health conditions on the economic and business environments in which we operate, including the impact of actions taken by governmental authorities to address these situations;

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

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

•any unanticipated or greater than anticipated adverse conditions in the national or local economies in which we operate;

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

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

•risks with respect to our ability to identify and complete future mergers or acquisitions as well as our ability to successfully expand and integrate those businesses and operations that we acquire;

•our ability to attract and retain key employees;

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

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

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

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

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

•the availability of and access to capital, particularly if there were to be increased capital requirements or enhanced regulatory supervision;

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

•volatility in the ACL resulting from the CECL methodology, either alone or as that may be affected by conditions affecting our business;

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

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

•limitations on our ability to declare and pay dividends and other distributions from the Bank to the Holding Company, which could affect Holding Company liquidity, including its ability to pay dividends to shareholders or take other capital actions;

•the potential effects of events beyond our control that may have a destabilizing effect on financial markets and the economy, such as inflation or recession, terrorist activities, wars and other foreign conflicts, climate change, disruptions in our customers’ supply chains, disruptions in transportation, essential utility outages or trade disputes and related tariffs; and

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

We caution readers that the foregoing list of factors is not exclusive, is not necessarily in order of importance and readers should not place undue reliance on forward-looking statements. Additional factors that may cause actual results to differ materially from those contemplated by any forward-looking statements also may be found in our 2022 10-K (including the “Risk Factor” section of that report), Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K filed with the SEC and available at the SEC’s website at http://www.sec.gov. We do not intend to and, except as required by law, hereby disclaim any obligation to update or revise any forward-looking statement contained in this Report, which speaks only as of the date of its filing with the SEC, whether as a result of new information, future events, or otherwise. The financial statements and information contained herein have not been reviewed, or confirmed for accuracy or relevance, by the FDIC or any other regulator.

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements


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


	September 30, 2023		December 31, 2022
ASSETS
Cash and due from banks	$	192,726	$	195,771
Interest-bearing deposits in banks	566,779		316,082
Federal funds and other short-term investments	—		135,000
Cash and cash equivalents	759,505		646,853
Debt securities available-for-sale	3,182,112		3,614,333
Debt securities held-to-maturity (fair value $1,992,364 and $2,191,073, respectively)	2,518,773		2,613,648
Loans held for sale	37,110		13,600
Loans and leases held for investment	18,202,807		15,334,627
Less allowance for credit losses - loans and leases	(201,557)		(159,357)
Loans and leases, net	18,001,250		15,175,270
Premises and equipment, net	371,435		298,456
Bank owned life insurance	344,647		299,297



Goodwill and other intangible assets, net	994,142		779,248
Other assets	660,233		568,179
Total assets	$	26,869,207	$	24,008,884
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Noninterest-bearing demand	$	6,782,031	$	7,643,081



Interest-bearing deposits	16,075,837		12,233,426


Total deposits	22,857,868		19,876,507
Short-term borrowings	37,348		158,933
Federal Home Loan Bank advances	—		550,000
Long-term debt	324,786		324,663

Accrued expenses and other liabilities	465,381		398,107
Total liabilities	23,685,383		21,308,210
Shareholders' equity:
Preferred stock, $1 par value: 10,000,000 shares authorized; 3,745 and 4,000 shares Series I issued and outstanding, respectively; $25,000 per share liquidation preference	90,283		96,422
Common stock, $1 par value: 200,000,000 shares authorized, 118,975,652 and 106,222,758 shares issued and outstanding, respectively	118,976		106,223
Common stock issuable: 608,646 and 607,128 shares, respectively	12,782		12,307
Capital surplus	2,697,671		2,306,366
Retained earnings	596,617		508,844
Accumulated other comprehensive loss	(332,505)		(329,488)
Total shareholders' equity	3,183,824		2,700,674
Total liabilities and shareholders' equity	$	26,869,207	$	24,008,884

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,
	2023		2022		2023		2022

Interest revenue:
Loans, including fees	$	273,781	$	174,065	$	760,696	$	476,072
Investment securities, including tax exempt of $1,722, $2,568, $5,563 and $7,762, respectively	44,729		36,953		125,775		91,043
Deposits in banks and short-term investments	4,637		2,869		11,938		5,209
Total interest revenue	323,147		213,887		898,409		572,324

Interest expense:






Deposits	116,733		9,880		263,811		17,313
Short-term borrowings	189		27		3,186		27
Federal Home Loan Bank advances	—		—		5,761		—
Long-term debt	3,669		4,206		11,339		12,515
Total interest expense	120,591		14,113		284,097		29,855
Net interest revenue	202,556		199,774		614,312		542,469
Provision for credit losses	30,268		15,392		74,804		44,082
Net interest revenue after provision for credit losses	172,288		184,382		539,508		498,387

Noninterest income:
Service charges and fees	10,315		9,569		28,791		28,644
Mortgage loan gains and other related fees	6,159		6,297		17,264		29,420
Wealth management fees	6,451		5,879		17,775		17,759
Gains from sales of other loans, net	2,688		2,228		6,909		9,226
Lending and loan servicing fees	2,985		2,946		9,979		7,518
Securities losses, net	—		—		(1,644)		(3,688)
Other	3,379		5,003		19,499		15,474
Total noninterest income	31,977		31,922		98,573		104,353
Total revenue	204,265		216,304		638,081		602,740

Noninterest expenses:
Salaries and employee benefits	81,173		67,823		236,121		208,062
Communications and equipment	10,902		8,795		31,654		27,718
Occupancy	10,941		9,138		31,024		27,381
Advertising and public relations	2,251		2,544		6,914		6,332
Postage, printing and supplies	2,386		2,190		7,305		6,308
Professional fees	7,006		4,821		19,670		14,670
Lending and loan servicing expense	2,697		2,333		7,546		7,746
Outside services - electronic banking	2,561		3,159		8,646		8,629
FDIC assessments and other regulatory charges	4,314		2,356		12,457		6,796
Amortization of intangibles	4,171		1,678		11,120		5,207
Merger-related and other charges	9,168		1,746		21,444		17,905
Other	6,904		6,172		22,785		16,066
Total noninterest expenses	144,474		112,755		416,686		352,820
Income before income taxes	59,791		103,549		221,395		249,920
Income tax expense	11,925		22,388		47,941		53,898
Net income	$	47,866	$	81,161	$	173,454	$	196,022

Net income available to common shareholders	$	46,775	$	79,035	$	168,245	$	189,858

Net income per common share:
Basic	$	0.39	$	0.74	$	1.44	$	1.78
Diluted	0.39		0.74		1.44		1.78
Weighted average common shares outstanding:
Basic	119,506		106,687		116,925		106,616
Diluted	119,624		106,800		117,084		106,732

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
2023
Net income	$	59,791	$	(11,925)	$	47,866	$	221,395	$	(47,941)	$	173,454
Other comprehensive income:
Unrealized losses on available-for-sale securities:
Unrealized holding losses	(38,209)		8,900		(29,309)		(14,683)		3,398		(11,285)

Reclassification adjustment for losses included in net income	—		—		—		1,644		(374)		1,270
Net unrealized losses	(38,209)		8,900		(29,309)		(13,039)		3,024		(10,015)


Amortization of unrealized losses on held-to-maturity securities transferred from available-for-sale	2,478		(593)		1,885		7,964		(1,917)		6,047

Derivative instruments designated as cash flow hedges:
Unrealized holding gains on derivatives	1,091		(279)		812		3,192		(815)		2,377
Gains on derivative instruments realized in net income	(42)		11		(31)		(2,098)		536		(1,562)
Net cash flow hedge activity	1,049		(268)		781		1,094		(279)		815


Amortization of defined benefit pension plan net periodic pension cost components	61		(16)		45		183		(47)		136


Total other comprehensive loss	(34,621)		8,023		(26,598)		(3,798)		781		(3,017)
Comprehensive income	$	25,170	$	(3,902)	$	21,268	$	217,597	$	(47,160)	$	170,437

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
Reclassification adjustment for 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)

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, 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 June 30, 2023	115,265,912	$	96,165	$	115,266	$	12,228	$	2,610,523	$	577,316	$	(305,907)	$	3,105,591
Net income										47,866				47,866
Other comprehensive loss												(26,598)		(26,598)
Impact of acquisitions	3,508,604			3,508				84,171						87,679
Preferred stock dividends										(1,624)				(1,624)
Common stock dividends ($0.23 per share)										(27,733)				(27,733)
Purchases of preferred stock		(5,882)								792				(5,090)
Impact of equity-based compensation awards	197,700			198		411		2,895						3,504
Impact of other United sponsored equity plans	3,436			4		143		82						229
Balance at September 30, 2023	118,975,652	$	90,283	$	118,976	$	12,782	$	2,697,671	$	596,617	$	(332,505)	$	3,183,824












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

Balance at December 31, 2022	106,222,758	$	96,422	$	106,223	$	12,307	$	2,306,366	$	508,844	$	(329,488)	$	2,700,674
Net income										173,454				173,454
Other comprehensive loss												(3,017)		(3,017)

Impact of acquisitions	12,279,135			12,279				381,861						394,140
Purchases of preferred stock		(6,139)						35		792				(5,312)
Preferred stock dividends										(5,062)				(5,062)
Common stock dividends ($0.69 per share)										(81,411)				(81,411)
Impact of equity-based compensation awards	430,002			430		1,034		8,784						10,248
Impact of other United sponsored equity plans	43,757			44		(559)		625						110

Balance at September 30, 2023	118,975,652	$	90,283	$	118,976	$	12,782	$	2,697,671	$	596,617	$	(332,505)	$	3,183,824

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,
	2023		2022
Operating activities:
Net income	$	173,454	$	196,022
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion, net	34,027		34,707
Provision for credit losses	74,804		44,082
Stock based compensation	7,093		6,649
Deferred income tax expense	14,645		6,063
Securities losses, net	1,644		3,688
Gains from sales of other loans	(6,909)		(9,226)

Changes in assets and liabilities:
Other assets	(16,935)		(2,072)
Accrued expenses and other liabilities	11,796		92,084
Loans held for sale	(21,423)		136,405
Net cash provided by operating activities	272,196		508,402

Investing activities:
Debt securities held-to-maturity:
Proceeds from maturities and calls	100,396		140,253
Purchases	—		(326,494)
Debt securities available-for-sale:
Proceeds from sales	595,234		281,521
Proceeds from maturities and calls	421,924		493,848
Purchases	(295,054)		(1,665,466)
Net increase in loans	(875,223)		(772,740)
Equity investments, outflows	(134,439)		(29,685)
Equity investments, inflows	124,056		17,336

Proceeds from sales of premises and equipment	2,529		4,846
Purchases of premises and equipment	(59,157)		(26,300)
Net cash received in acquisition	207,566		35,243

Net cash paid for whole branch disposal	(93,613)		—
Other investing inflows	3,413		3,997
Net cash used in investing activities	(2,368)		(1,843,641)

Financing activities:
Net increase (decrease) in deposits	886,440		(423,750)
Net decrease in short-term borrowings	(310,267)		—

Proceeds from FHLB advances	2,225,000		—
Repayment of FHLB advances	(2,870,000)		—




Cash dividends on common stock	(77,352)		(63,256)
Cash dividends on preferred stock	(5,062)		(5,157)
Other financing inflows	5,405		560
Other financing outflows	(11,340)		(7,648)
Net cash used in financing activities	(157,176)		(499,251)

Net change in cash and cash equivalents	112,652		(1,834,490)

Cash and cash equivalents, beginning of period	646,853		2,318,510

Cash and cash equivalents, end of period	$	759,505	$	484,020

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 and Updates to Significant Accounting Policies

Basis of Presentation

United’s accounting and financial reporting policies conform to GAAP and reporting guidelines of banking regulatory authorities. The accompanying interim consolidated financial statements have not been audited. All material intercompany balances and transactions have been eliminated. A more detailed description of United’s accounting policies is included in its 2022 10-K.

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

Updates to Significant Accounting Policies

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

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

Note 2 – Accounting Standards Updates and Recently Adopted Standards

Recently Adopted Standards

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

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

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

Recently Issued Standards

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

In August 2023, the FASB issued ASU No 2023-05, Business Combinations - Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement. The update addresses the accounting for contributions made to a joint venture, upon formation,

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

in a joint venture’s separate financial statements. Specifically, a joint venture must apply a new basis of accounting upon formation and will initially measure its assets and liabilities at fair value. This guidance is effective prospectively for all joint venture formations dated on or after January 1, 2025. United does not expect the new guidance to have a material impact on its consolidated financial statements.

In October 2023, the FASB issued ASU No 2023-06, Disclosure Improvements - Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. The update clarifies or improves disclosure and presentation requirements for a variety of topics, including cash flows from derivative instruments, methods used in the diluted earnings per share computation and weighted-average interest rates on short term borrowings, This guidance is effective prospectively from the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective. United does not expect the new guidance to have a material impact on its consolidated financial statements.

Note 3 – Supplemental Cash Flow Information

The supplemental schedule of significant non-cash investing and financing activities for the nine months ended September 30, 2023 and 2022 is as follows (in thousands).


	Nine Months Ended September 30,
	2023		2022


Significant non-cash investing and financing transactions:


Commitments to fund equity investments	$	16,410	$	—

Transfers of AFS securities to HTM securities	—		1,288,982

Acquisitions:
Assets acquired	2,922,243		3,254,173
Liabilities assumed	2,527,654		2,657,173
Net assets acquired	394,589		597,000
Common stock issued and options converted	394,140		596,376

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 4 – Acquisitions

Acquisition of First Miami

On July 1, 2023, United acquired all of the outstanding common stock of First Miami in a stock transaction. First Miami operated three branches in the Miami metropolitan area, which facilitated United’s expansion within that market. United’s operating results for the three and nine months ended September 30, 2023 include the operating results of the acquired business for the period subsequent to the acquisition date of July 1, 2023.

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


First Miami
	Fair Value Recorded by United (1)
		July 1, 2023
	Assets
	Cash and cash equivalents	$	150,467
	Debt securities	216,703

	Loans held for investment	577,183
	Premises and equipment	11,905




	Core deposit intangible	17,950
	Other assets	20,909
	Total assets acquired	995,117
	Liabilities
	Deposits	865,387
	Short-term borrowings	47,664

	Other liabilities	17,581
	Total liabilities assumed	930,632
	Total identifiable net assets	64,485
	Consideration transferred
	Cash	2
	Common stock issued (3,508,604 shares)	87,679

	Total fair value of consideration transferred	87,681
	Goodwill	$	23,196

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

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


	July 1, 2023
PCD Loans
Par value	$	94,902
ACL at acquisition	(3,717)
Non-credit discount	(6,607)
Purchase price	$	84,578

Non- PCD:
Fair value	$	492,605
Gross contractual amounts receivable	622,181
Estimate of contractual cash flows not expected to be collected	7,012

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Acquisition of Progress

On January 3, 2023, United acquired all of the outstanding common stock of Progress in a stock transaction. Progress operated 13 offices primarily located in Alabama and the Florida Panhandle, which facilitated United’s growth into those markets. United’s operating results for the three and nine months ended September 30, 2023 include the operating results of the acquired business for the period subsequent to the acquisition date of January 3, 2023.

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


Progress
	Fair Value Recorded by United (1)
		January 3, 2023
	Assets
	Cash and cash equivalents	$	57,548
	Debt securities	111,006
	Loans held for sale	2,087
	Loans held for investment	1,442,959
	Premises and equipment	21,118
	Bank-owned life insurance	40,723



	Core deposit intangible	39,980
	Other assets	42,965
	Total assets acquired	1,758,386
	Liabilities
	Deposits	1,334,476
	Short-term borrowings	141,017
	Federal Home Loan Bank advances	95,000
	Other liabilities	26,529
	Total liabilities assumed	1,597,022


	Total identifiable net assets	161,364
	Consideration transferred
	Cash	447
	Common stock issued (8,770,531 shares)	296,444
	Options converted	10,017
	Total fair value of consideration transferred	306,908
	Goodwill	$	145,544

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

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

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


	January 3, 2023
PCD loans:
Par value	$	64,913
ACL at acquisition	(2,704)
Non-credit discount	(150)
Purchase price	$	62,059

Non-PCD loans:
Fair value	$	1,380,900
Gross contractual amounts receivable	1,626,243
Estimate of contractual cash flows not expected to be collected	9,287

Pro forma information

The following table discloses the impact of the First Miami and Progress acquisitions since their respective dates of acquisition. The table also presents certain pro forma information as if First Miami and Progress had been acquired on January 1, 2022 and Reliant had been acquired on January 1, 2021. These results combine the historical results of the acquired entities with United’s consolidated statement of income. Adjustments were made for the estimated impact of certain fair value adjustments and other acquisition-related activity; however pro forma financial results presented are not necessarily indicative of what would have occurred had the acquisitions taken place in earlier years.

Merger-related costs related to the First Miami acquisition for the three and nine months ended September 30, 2023 of $6.53 million and $6.91 million, respectively, have been excluded from the pro forma information for those periods presented below and included in the three and nine months ended September 30, 2022 pro forma information. Merger-related costs related to the Progress acquisition for the three and nine months ended September 30, 2023 of $182,000 and $9.96 million, respectively, have been excluded from the pro forma information for those periods presented below and included in the three and nine months ended September 30, 2022 pro forma information. Merger-related costs related to the Reliant acquisition for the three and nine months ended September 30, 2022 of $760,000 and $14.8 million, respectively, have been excluded from the pro forma information presented below. The actual results and pro forma information were as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	Revenue		Net Income		Revenue		Net Income
2023
Actual Progress results included in statement of income since acquisition date	$	16,934	$	7,569	$	41,555	$	12,667
Actual First Miami results included in statement of income since acquisition date	3,488		(3,330)		3,488		(3,330)
Supplemental consolidated pro forma as if Progress and First Miami had been acquired January 1, 2022	207,523		55,538		667,155		197,929

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 Progress and First Miami had been acquired January 1, 2022 and Reliant had been acquired January 1, 2021	$	246,612	$	83,642	$	691,694	$	215,264

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 5 – Investment Securities

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


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
As of September 30, 2023
U.S. Treasuries	$	19,857	$	—	$	2,591	$	17,266
U.S. Government agencies & GSEs	98,989		—		21,216		77,773
State and political subdivisions	294,187		4		71,485		222,706
Residential MBS, Agency & GSEs	1,407,762		—		277,747		1,130,015

Commercial MBS, Agency & GSEs	682,978		—		150,248		532,730

Supranational entities	15,000		—		3,126		11,874
Total	$	2,518,773	$	4	$	526,413	$	1,992,364

As of December 31, 2022
U.S. Treasuries	$	19,834	$	—	$	2,417	$	17,417
U.S. Government agencies & GSEs	99,679		—		18,169		81,510
State and political subdivisions	295,945		56		64,340		231,661
Residential MBS, Agency & GSEs	1,488,028		35		223,566		1,264,497

Commercial MBS, Agency & GSEs	695,162		—		111,586		583,576

Supranational entities	$	15,000	$	—	$	2,588	$	12,412
Total	$	2,613,648	$	91	$	422,666	$	2,191,073

The amortized cost basis, unrealized gains and losses, and fair value of AFS debt securities as of the dates indicated are presented below (in thousands). During the second quarter of 2023, United entered into fair value hedges on stated amounts of a closed portfolio of AFS debt securities using the portfolio layer method, which is further explained in Note 7.


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
As of September 30, 2023
U.S. Treasuries	$	297,943	$	25	$	14,138	$	283,830
U.S. Government agencies & GSEs	242,642		255		18,202		224,695
State and political subdivisions	183,261		—		27,016		156,245
Residential MBS, Agency & GSEs	1,408,719		16		185,026		1,223,709
Residential MBS, Non-agency	352,872		—		30,159		322,713
Commercial MBS, Agency & GSEs	666,283		—		90,653		575,630
Commercial MBS, Non-agency	27,633		—		1,203		26,430
Corporate bonds	218,584		84		23,863		194,805
Asset-backed securities	177,876		1		3,822		174,055
Total	3,575,813		381		394,082		3,182,112



As of December 31, 2022
U.S. Treasuries	$	163,972	$	—	$	14,620	$	149,352
U.S. Government agencies & GSEs	266,347		463		16,694		250,116
State and political subdivisions	329,723		151		26,126		303,748
Residential MBS, Agency & GSEs	1,609,442		13		160,636		1,448,819
Residential MBS, Non-agency	374,535		—		27,873		346,662
Commercial MBS, Agency & GSEs	720,282		471		79,407		641,346
Commercial MBS, Non-agency	31,624		—		1,058		30,566
Corporate bonds	236,181		34		23,763		212,452
Asset-backed securities	239,220		—		7,948		231,272
Total	$	3,971,326	$	1,132	$	358,125	$	3,614,333

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Securities with a carrying value of $4.17 billion and $2.53 billion were pledged, primarily to secure public deposits and provide contingent liquidity through the Bank Term Funding Program at the Federal Reserve Bank, at September 30, 2023 and December 31, 2022, respectively.

The following table summarizes HTM debt securities in an unrealized loss position as of the dates indicated (in thousands).


	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
As of September 30, 2023
U.S. Treasuries	$	—	$	—	$	17,266	$	2,591	$	17,266	$	2,591
U.S. Government agencies & GSEs	—		—		77,773		21,216		77,773		21,216
State and political subdivisions	18,580		660		203,422		70,825		222,002		71,485
Residential MBS, Agency & GSEs	1,763		44		1,128,250		277,703		1,130,013		277,747

Commercial MBS, Agency & GSEs	6,019		655		526,711		149,593		532,730		150,248

Supranational entities	—		—		11,874		3,126		11,874		3,126
Total unrealized loss position	$	26,362	$	1,359	$	1,965,296	$	525,054	$	1,991,658	$	526,413

As of December 31, 2022
U.S. Treasuries	$	17,417	$	2,417	$	—	$	—	$	17,417	$	2,417
U.S. Government agencies & GSEs	10,687		1,813		70,823		16,356		81,510		18,169
State and political subdivisions	104,243		20,639		117,115		43,701		221,358		64,340
Residential MBS, Agency & GSEs	296,673		38,289		965,785		185,277		1,262,458		223,566

Commercial MBS, Agency & GSEs	176,848		24,497		406,728		87,089		583,576		111,586

Supranational entities	12,412		2,588		—		—		12,412		2,588
Total unrealized loss position	$	618,280	$	90,243	$	1,560,451	$	332,423	$	2,178,731	$	422,666

The following table summarizes AFS debt securities in an unrealized loss position as of the dates indicated (in thousands).


	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
As of September 30, 2023
U.S. Treasuries	$	24,860	$	3	$	100,267	$	14,135	$	125,127	$	14,138
U.S. Government agencies & GSEs	33,990		155		163,009		18,047		196,999		18,202
State and political subdivisions	764		5		155,480		27,011		156,244		27,016
Residential MBS, Agency & GSEs	51,018		669		1,166,396		184,357		1,217,414		185,026
Residential MBS, Non-agency	—		—		322,713		30,159		322,713		30,159
Commercial MBS, Agency & GSEs	63,198		2,876		512,431		87,777		575,629		90,653
Commercial MBS, Non-agency	—		—		26,430		1,203		26,430		1,203
Corporate bonds	4,277		351		187,132		23,512		191,409		23,863
Asset-backed securities	8,766		45		161,689		3,777		170,455		3,822
Total unrealized loss position	$	186,873	$	4,104	$	2,795,547	$	389,978	$	2,982,420	$	394,082

As of December 31, 2022
U.S. Treasuries	$	49,259	$	724	$	100,093	$	13,896	$	149,352	$	14,620
U.S. Government agencies & GSEs	93,015		2,124		108,093		14,570		201,108		16,694
State and political subdivisions	207,749		9,906		62,606		16,220		270,355		26,126
Residential MBS, Agency & GSEs	1,049,648		102,852		392,288		57,784		1,441,936		160,636
Residential MBS, Non-agency	338,399		27,095		8,263		778		346,662		27,873
Commercial MBS, Agency & GSEs	288,787		17,304		332,088		62,103		620,875		79,407
Commercial MBS, Non-agency	30,566		1,058		—		—		30,566		1,058
Corporate bonds	83,010		7,776		127,603		15,987		210,613		23,763
Asset-backed securities	97,705		2,664		133,567		5,284		231,272		7,948
Total unrealized loss position	$	2,238,138	$	171,503	$	1,264,601	$	186,622	$	3,502,739	$	358,125

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

At September 30, 2023, there were 672 AFS debt securities and 331 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, 2023 were primarily attributable to changes in interest rates.

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

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


	Accrued Interest Receivable
	September 30, 2023		December 31, 2022
HTM	$	6,040	$	7,234
AFS	10,983		15,281

The amortized cost and fair value of AFS and HTM debt securities at September 30, 2023, by contractual maturity, are presented in the following table (in thousands). Expected maturities may differ from contractual maturities because issuers and borrowers may have the right to call or prepay obligations.


	AFS				HTM
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within 1 year:
U.S. Treasuries	$	183,791	$	183,807	$	—	$	—
U.S. Government agencies & GSEs	284		280		—		—
State and political subdivisions	2,019		1,969		1,200		1,198
Corporate bonds	9,601		9,316		—		—

	195,695		195,372		1,200		1,198
1 to 5 years:
U.S. Treasuries	114,152		100,023		19,857		17,266
U.S. Government agencies & GSEs	39,182		35,445		—		—
State and political subdivisions	26,560		23,998		28,316		25,992
Corporate bonds	155,080		139,674		—		—

	334,974		299,140		48,173		43,258
5 to 10 years:

U.S. Government agencies & GSEs	66,994		57,698		72,566		58,057
State and political subdivisions	49,741		39,977		42,809		34,348
Corporate bonds	53,099		44,945		—		—
Supranational entities	—		—		15,000		11,874
	169,834		142,620		130,375		104,279
More than 10 years:
U.S. Government agencies & GSEs	136,182		131,272		26,423		19,716
State and political subdivisions	104,941		90,301		221,862		161,168
Corporate bonds	804		870		—		—

	241,927		222,443		248,285		180,884
Debt securities not due at a single maturity date:
Asset-backed securities	177,876		174,055		—		—
Residential MBS	1,761,591		1,546,422		1,407,762		1,130,015
Commercial MBS	693,916		602,060		682,978		532,730
	2,633,383		2,322,537		2,090,740		1,662,745

Total	$	3,575,813	$	3,182,112	$	2,518,773	$	1,992,364

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Proceeds from sales	$	214,573	$	—	$	595,234	$	281,521

Gross realized gains	$	—	$	—	$	1,373	$	1,009
Gross realized losses	—		—		(3,017)		(4,697)

Securities gains (losses), net	$	—	$	—	$	(1,644)	$	(3,688)

Income tax expense (benefit) attributable to sales	$	—	$	—	$	(374)	$	(979)

Investment securities sold in the third quarter of 2023 were those received through the First Miami acquisition. The securities were sold within a few days of the acquisition date and therefore resulted in no gain or loss as the sales price confirmed the value on the acquisition date.

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, 2023		December 31, 2022
Owner occupied commercial real estate	$	3,278,582	$	2,734,666
Income producing commercial real estate	4,130,099		3,261,626
Commercial & industrial	2,504,330		2,252,322
Commercial construction	1,849,507		1,597,848
Equipment financing	1,534,352		1,374,251
Total commercial	13,296,870		11,220,713
Residential mortgage	3,043,120		2,355,061
Home equity	940,729		850,269
Residential construction	398,765		442,553
Manufactured housing	343,219		316,741
Consumer	180,104		149,290


Total loans	18,202,807		15,334,627

Less allowance for credit losses - loans	(201,557)		(159,357)

Loans, net	$	18,001,250	$	15,175,270

Accrued interest receivable related to loans totaled $63.1 million and $52.0 million at September 30, 2023 and December 31, 2022, respectively, and was reported in other assets on the consolidated balance sheets. Accrued interest receivable was excluded from the estimate of credit losses.

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

The following table presents the amortized cost of certain 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,
	2023		2022		2023		2022
Guaranteed portion of SBA/USDA loans	$	26,381	$	20,405	$	70,223	$	87,867
Equipment financing receivables	37,671		21,557		76,945		65,534
Total	$	64,052	$	41,962	$	147,168	$	153,401

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

At September 30, 2023 and December 31, 2022, equipment financing receivables included leases of $65.7 million and $46.0 million, respectively. The components of the net investment in leases, which included both sales-type and direct financing, are presented below (in thousands).


	September 30, 2023		December 31, 2022
Minimum future lease payments receivable	$	71,773	$	49,723
Estimated residual value of leased equipment	3,971		2,804
Initial direct costs	1,349		767
Security deposits	(418)		(429)

Unearned income	(10,997)		(6,877)
Net investment in leases	$	65,678	$	45,988

Minimum future lease payments expected to be received from equipment financing lease contracts as of September 30, 2023 were as follows (in thousands):


Year
Remainder of 2023	$	6,138
2024	22,773
2025	18,549
2026	13,320
2027	8,589
Thereafter	2,404
Total	$	71,773

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Nonaccrual and Past Due Loans

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


	Accruing
	Current Loans		Loans Past Due
			30 - 59 Days		60 - 89 Days		> 90 Days		Nonaccrual Loans		Total Loans
As of September 30, 2023
Owner occupied commercial real estate	$	3,271,847	$	1,303	$	298	$	—	$	5,134	$	3,278,582
Income producing commercial real estate	4,099,376		409		59		—		30,255		4,130,099
Commercial & industrial	2,485,006		5,575		367		—		13,382		2,504,330
Commercial construction	1,848,362		80		—		—		1,065		1,849,507
Equipment financing	1,517,824		4,068		3,254		—		9,206		1,534,352
Total commercial	13,222,415		11,435		3,978		—		59,042		13,296,870
Residential mortgage	3,026,653		3,995		579		—		11,893		3,043,120
Home equity	934,376		1,285		1,057		2		4,009		940,729
Residential construction	394,566		2,125		—		—		2,074		398,765
Manufactured housing	317,831		10,388		2,289		—		12,711		343,219
Consumer	179,314		498		203		—		89		180,104
Total loans	$	18,075,155	$	29,726	$	8,106	$	2	$	89,818	$	18,202,807

As of December 31, 2022
Owner occupied commercial real estate	$	2,731,574	$	1,522	$	1,047	$	—	$	523	$	2,734,666
Income producing commercial real estate	3,257,232		468		41		—		3,885		3,261,626
Commercial & industrial	2,234,284		3,288		274		6		14,470		2,252,322
Commercial construction	1,597,268		447		—		—		133		1,597,848
Equipment financing	1,362,622		4,285		1,906		—		5,438		1,374,251
Total commercial	11,182,980		10,010		3,268		6		24,449		11,220,713
Residential mortgage	2,342,196		1,939		7		—		10,919		2,355,061
Home equity	844,888		2,709		784		—		1,888		850,269
Residential construction	441,673		20		455		—		405		442,553
Manufactured housing	302,386		6,913		924		—		6,518		316,741
Consumer	148,943		237		48		9		53		149,290
Total loans	$	15,263,066	$	21,828	$	5,486	$	15	$	44,232	$	15,334,627

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


	Nonaccrual Loans
	September 30, 2023						December 31, 2022
	With no allowance		With an allowance		Total		With no allowance		With an allowance		Total
Owner occupied commercial real estate	$	4,702	$	432	$	5,134	$	276	$	247	$	523
Income producing commercial real estate	11,117		19,138		30,255		3,798		87		3,885
Commercial & industrial	11,448		1,934		13,382		13,917		553		14,470
Commercial construction	1,004		61		1,065		69		64		133
Equipment financing	19		9,187		9,206		85		5,353		5,438
Total commercial	28,290		30,752		59,042		18,145		6,304		24,449
Residential mortgage	2,222		9,671		11,893		2,159		8,760		10,919
Home equity	1,405		2,604		4,009		430		1,458		1,888
Residential construction	1,405		669		2,074		311		94		405
Manufactured housing	—		12,711		12,711		—		6,518		6,518
Consumer	1		88		89		3		50		53
Total	$	33,323	$	56,495	$	89,818	$	21,048	$	23,184	$	44,232

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Risk Ratings

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

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

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

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

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

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

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

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

The following tables present the risk category of term loans and, for 2023, gross charge-offs by vintage year, which is the year of origination or most recent renewal, as of the date indicated (in thousands).



	Term Loans by Origination Year												Revolvers		Revolvers converted to term loans		Total
As of September 30, 2023	2023		2022		2021		2020		2019		Prior

Owner occupied commercial real estate
Pass	$	548,702	$	697,407	$	648,517	$	591,130	$	212,522	$	369,305	$	108,956	$	17,900	$	3,194,439
Special Mention	2,739		5,515		4,189		5,859		9,722		3,045		—		256		31,325
Substandard	6,908		7,611		4,345		13,341		4,981		11,587		1,327		2,718		52,818

Total owner occupied commercial real estate	$	558,349	$	710,533	$	657,051	$	610,330	$	227,225	$	383,937	$	110,283	$	20,874	$	3,278,582
Current period gross charge-offs	$	207	$	—	$	—	$	656	$	—	$	—	$	—	$	—	$	863
Income producing commercial real estate
Pass	$	480,148	$	943,710	$	798,023	$	761,973	$	306,892	$	466,308	$	56,787	$	12,413	$	3,826,254
Special Mention	42,427		37,350		19,078		26,535		35,108		9,627		—		—		170,125
Substandard	37,236		20,604		8,061		20,766		17,418		29,579		—		56		133,720

Total income producing commercial real estate	$	559,811	$	1,001,664	$	825,162	$	809,274	$	359,418	$	505,514	$	56,787	$	12,469	$	4,130,099
Current period gross charge-offs	$	3,033	$	2,534	$	—	$	—	$	—	$	2,291	$	—	$	—	$	7,858
Commercial & industrial
Pass	$	536,057	$	475,831	$	316,737	$	141,890	$	105,098	$	172,251	$	583,560	$	14,397	$	2,345,821
Special Mention	5,901		2,843		3,788		5,624		8,490		776		25,636		294		53,352
Substandard	18,786		5,802		25,867		6,583		4,265		2,060		39,830		1,964		105,157

Total commercial & industrial	$	560,744	$	484,476	$	346,392	$	154,097	$	117,853	$	175,087	$	649,026	$	16,655	$	2,504,330
Current period gross charge-offs	$	5,433	$	1,551	$	13,056	$	2,379	$	315	$	41	$	—	$	1,578	$	24,353
Commercial construction
Pass	$	508,200	$	668,556	$	333,915	$	177,196	$	58,028	$	29,494	$	56,061	$	899	$	1,832,349
Special Mention	57		129		8		50		—		—		—		—		244
Substandard	6,612		1,004		6,838		2,136		—		87		—		237		16,914

Total commercial construction	$	514,869	$	669,689	$	340,761	$	179,382	$	58,028	$	29,581	$	56,061	$	1,136	$	1,849,507
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Equipment financing
Pass	$	557,422	$	544,029	$	266,554	$	99,360	$	51,089	$	5,637	$	—	$	—	$	1,524,091
Substandard	961		4,106		2,996		1,287		880		31		—		—		10,261

Total equipment financing	$	558,383	$	548,135	$	269,550	$	100,647	$	51,969	$	5,668	$	—	$	—	$	1,534,352
Current period gross charge-offs	$	32	$	6,840	$	5,818	$	1,244	$	748	$	312	$	—	$	—	$	14,994
Residential mortgage
Pass	$	652,060	$	959,694	$	746,217	$	326,186	$	86,697	$	254,232	$	402	$	3,468	$	3,028,956
Substandard	443		2,499		1,573		887		1,565		6,944		—		253		14,164
Total residential mortgage	$	652,503	$	962,193	$	747,790	$	327,073	$	88,262	$	261,176	$	402	$	3,721	$	3,043,120
Current period gross charge-offs	$	—	$	23	$	—	$	—	$	—	$	38	$	—	$	—	$	61
Home equity
Pass	$	—	$	—	$	—	$	—	$	—	$	—	$	909,429	$	27,059	$	936,488
Substandard	—		—		—		—		—		—		38		4,203		4,241
Total home equity	$	—	$	—	$	—	$	—	$	—	$	—	$	909,467	$	31,262	$	940,729
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	167	$	167
Residential construction
Pass	$	213,572	$	138,093	$	29,365	$	5,527	$	1,203	$	6,435	$	—	$	94	$	394,289
Substandard	2,639		1,163		425		7		18		224		—		—		4,476
Total residential construction	$	216,211	$	139,256	$	29,790	$	5,534	$	1,221	$	6,659	$	—	$	94	$	398,765
Current period gross charge-offs	$	—	$	1,111	$	—	$	—	$	—	$	—	$	—	$	—	$	1,111
Manufactured housing
Pass	$	45,600	$	71,672	$	50,298	$	45,392	$	32,324	$	83,385	$	—	$	—	$	328,671
Substandard	436		3,834		3,196		2,214		1,037		3,831		—		—		14,548
Total consumer	$	46,036	$	75,506	$	53,494	$	47,606	$	33,361	$	87,216	$	—	$	—	$	343,219
Current period gross charge-offs	$	3	$	1,097	$	503	$	300	$	205	$	337	$	—	$	—	$	2,445
Consumer
Pass	$	74,136	$	46,324	$	20,955	$	11,624	$	1,644	$	1,013	$	24,053	$	175	$	179,924
Substandard	20		64		56		23		—		17		—		—		180
Total consumer	$	74,156	$	46,388	$	21,011	$	11,647	$	1,644	$	1,030	$	24,053	$	175	$	180,104
Current period gross charge-offs	$	2,472	$	120	$	229	$	29	$	14	$	1	$	1	$	141	$	3,007

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, 2022	2022		2021		2020		2019		2018		Prior
Pass
Owner occupied commercial real estate	$	669,451	$	671,395	$	611,900	$	204,990	$	127,738	$	253,890	$	114,975	$	5,779	$	2,660,118
Income producing commercial real estate	812,804		753,936		733,946		248,259		171,108		255,485		50,026		9,953		3,035,517
Commercial & industrial	535,594		388,851		186,292		134,789		119,547		71,503		670,161		15,880		2,122,617
Commercial construction	732,147		391,963		256,087		78,778		11,977		19,973		70,819		1,433		1,563,177
Equipment financing	714,044		374,030		162,463		93,690		22,753		1,214		—		—		1,368,194
Total commercial	3,464,040		2,580,175		1,950,688		760,506		453,123		602,065		905,981		33,045		10,749,623
Residential mortgage	894,960		742,821		329,762		91,300		55,785		223,846		8		3,133		2,341,615
Home equity	—		—		—		—		—		—		824,153		23,948		848,101
Residential construction	344,443		82,289		4,478		1,742		1,545		7,549		—		31		442,077
Manufactured housing	78,097		54,976		48,908		34,836		31,060		61,148		—		—		309,025
Consumer	71,899		29,322		15,406		3,987		1,837		588		25,963		126		149,128
	4,853,439		3,489,583		2,349,242		892,371		543,350		895,196		1,756,105		60,283		14,839,569
Special Mention
Owner occupied commercial real estate	4,236		8,036		4,641		10,299		1,232		11,596		3,875		279		44,194
Income producing commercial real estate	41,423		1,137		44,802		32,821		21,647		50		805		—		142,685
Commercial & industrial	1,695		21,745		2,686		1,047		1,244		167		10,449		309		39,342
Commercial construction	850		33		1,640		13,237		4,891		28		—		—		20,679
Equipment financing	—		—		—		—		—		—		—		—		—
Total commercial	48,204		30,951		53,769		57,404		29,014		11,841		15,129		588		246,900
Residential mortgage	—		—		—		—		—		—		—		—		—
Home equity	—		—		—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—		—		—
Manufactured housing	—		—		—		—		—		—		—		—		—
Consumer	—		—		—		—		—		—		—		—		—
	48,204		30,951		53,769		57,404		29,014		11,841		15,129		588		246,900
Substandard
Owner occupied commercial real estate	9,835		77		2,873		4,490		1,204		8,055		209		3,611		30,354
Income producing commercial real estate	52,384		1,357		1,867		4,180		13,209		10,365		—		62		83,424
Commercial & industrial	10,431		19,477		3,880		4,557		11,019		1,189		39,333		477		90,363
Commercial construction	133		—		45		2		3,876		9,693		—		243		13,992
Equipment financing	1,625		2,160		1,303		705		236		28		—		—		6,057
Total commercial	74,408		23,071		9,968		13,934		29,544		29,330		39,542		4,393		224,190
Residential mortgage	1,195		964		1,364		1,836		2,589		5,296		—		202		13,446
Home equity	—		—		—		—		—		—		93		2,075		2,168
Residential construction	32		268		—		20		3		153		—		—		476
Manufactured housing	1,130		1,267		1,427		990		1,188		1,714		—		—		7,716
Consumer	20		77		34		1		25		4		1		—		162
	76,785		25,647		12,793		16,781		33,349		36,497		39,636		6,670		248,158

Total	$	4,978,428	$	3,546,181	$	2,415,804	$	966,556	$	605,713	$	943,534	$	1,810,870	$	67,541	$	15,334,627

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Modifications to Borrowers Experiencing Financial Difficulty

The period-end amortized cost of loans modified under the terms of a FDM during the nine months ended September 30, 2023 is presented in the following table (in thousands).


	New FDMs
	Post-Modification Amortized Cost by Type of Modification
	Extension		Payment Delay		Payment Delay & Extension		Rate Reduction & Extension		Total		% of Total Class of Receivable














Nine Months Ended September 30, 2023
Owner occupied commercial real estate	$	782	$	276	$	—	$	—	$	1,058	—	%
Income producing commercial real estate	38,139		—		—		35,369		73,508		1.8	%
Commercial & industrial	4,029		13,673		1,663		—		19,365		0.8
Commercial construction	—		366		—		—		366		—
Equipment financing	15,888		—		1,763		—		17,651		1.2

Residential mortgage	57		—		—		930		987		—

Residential construction	—		—		—		47		47		—
Manufactured housing	—		—		—		256		256		0.1

Total loans	$	58,895	$	14,315	$	3,426	$	36,602	$	113,238	0.6

Equipment financing FDMs typically consist of extensions and/or payment delays in which the borrower receives one or more three-month payment delays and/or extensions beyond the original maturity. For the remainder of extension FDMs occurring during the first nine months of 2023, the weighted average extension granted was approximately 13 months.

Commercial and industrial payment delay FDMs include $2.86 million of loans in bankruptcy status. Excluding bankruptcy status loans, the remainder of FDMs in this category had a weighted average payment delay of approximately three months.

Commercial and industrial payment delay and extension FDMs received a weighted average payment delay of approximately nine months and extensions of less than one year.

During the nine months ended September 30, 2023, income producing commercial real estate FDMs categorized as rate reduction and extensions resulted in a decrease in weighted average interest rate of 158 basis points and extended the weighted average maturity by two years. Residential mortgage and manufactured housing FDMs resulted in a decrease in weighted average interest rate of 562 basis points and extended the weighted average maturity by 17.5 years.

During the nine months ended September 30, 2023, there were $910,000 in equipment financing extension FDMs modified during 2023 that subsequently defaulted under modified loan terms.

Allowance for Credit Losses

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

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

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

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,
	2023												2022
	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	$	21,788	$	92	$	(656)	$	74	$	2,686	$	23,984	$	16,774	$	—	$	90	$	2,192	$	19,056
Income producing commercial real estate	38,775		3,092		(3,044)		33		6,732		45,588		33,284		(202)		26		(1,498)		31,610
Commercial & industrial	29,856		533		(19,702)		2,160		18,370		31,217		18,267		(373)		1,117		1,907		20,918
Commercial construction	22,276		—		—		49		(1,686)		20,639		16,062		—		(10)		1,902		17,954
Equipment financing	28,604		—		(7,215)		890		8,083		30,362		18,409		(1,987)		866		3,277		20,565
Residential mortgage	25,431		—		(16)		145		1,324		26,884		17,035		—		66		2,234		19,335
Home equity	10,609		—		(22)		2,806		(3,594)		9,799		7,487		(27)		129		884		8,473
Residential construction	3,446		—		(474)		133		(231)		2,874		2,086		—		109		109		2,304
Manufactured housing	9,204		—		(1,171)		3		1,342		9,378		6,614		(225)		5		958		7,352
Consumer	716		—		(863)		232		747		832		907		(1,010)		292		746		935
ACL - loans	190,705		3,717		(33,163)		6,525		33,773		201,557		136,925		(3,824)		2,690		12,711		148,502
ACL - unfunded commitments	21,572		—		—		—		(3,505)		18,067		16,117		—		—		2,681		18,798
Total ACL	$	212,277	$	3,717	$	(33,163)	$	6,525	$	30,268	$	219,624	$	153,042	$	(3,824)	$	2,690	$	15,392	$	167,300


	Nine Months Ended September 30,
	2023												2022
	Beginning Balance		Initial ACL - PCD loans (1)		Charge-Offs		Recoveries		(Release) Provision		Ending Balance		Beginning Balance		Initial ACL - PCD loans (2)		Charge- Offs		Recoveries		(Release) Provision		Ending Balance
Owner occupied commercial real estate	$	19,834	$	273	$	(863)	$	396	$	4,344	$	23,984	$	14,282	$	266	$	—	$	1,631	$	2,877	$	19,056
Income producing commercial real estate	32,082		3,399		(7,858)		1,357		16,608		45,588		24,156		4,366		(202)		432		2,858		31,610
Commercial & industrial	23,504		1,891		(24,353)		3,840		26,335		31,217		16,592		2,337		(4,978)		3,095		3,872		20,918
Commercial construction	20,120		39		—		191		289		20,639		9,956		2,857		(41)		548		4,634		17,954
Equipment financing	23,395		—		(14,994)		2,757		19,204		30,362		16,290		—		(4,644)		2,349		6,570		20,565
Residential mortgage	20,809		157		(61)		320		5,659		26,884		12,390		385		(53)		267		6,346		19,335
Home equity	8,707		534		(167)		2,977		(2,252)		9,799		6,568		60		(36)		565		1,316		8,473
Residential construction	2,049		124		(1,111)		162		1,650		2,874		1,847		1		—		208		248		2,304
Manufactured housing	8,098		—		(2,445)		29		3,696		9,378		—		2,438		(533)		14		5,433		7,352
Consumer	759		4		(3,007)		709		2,367		832		451		27		(2,544)		879		2,122		935
ACL - loans	159,357		6,421		(54,859)		12,738		77,900		201,557		102,532		12,737		(13,031)		9,988		36,276		148,502
ACL - unfunded commitments	21,163		—		—		—		(3,096)		18,067		10,992		—		—		—		7,806		18,798
Total ACL	$	180,520	$	6,421	$	(54,859)	$	12,738	$	74,804	$	219,624	$	113,524	$	12,737	$	(13,031)	$	9,988	$	44,082	$	167,300

(1) For the three months ended September 30, 2023, represents the initial ACL related to PCD loans acquired in the First Miami transaction. For the three and nine months ended September 30, 2023, represents the initial ACL related to PCD loans acquired in the First Miami and Progress transactions.

(2) Represents the initial ACL related to PCD loans acquired in the Reliant transaction during the nine months ended September 30, 2022.

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, 2023						December 31, 2022
	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	$	16,632	$	—	$	100,000	$	16,191	$	—
Cash flow hedge of trust preferred securities	20,000		—		—		20,000		—		—
Fair value hedge of AFS debt securities	666,286		—		—		—		—		—
Total	786,286		16,632		—		120,000		16,191		—

Derivatives not designated as hedging instruments:
Customer derivative positions	1,158,829		89		103,620		1,097,578		341		86,358
Dealer offsets to customer derivative positions	1,158,691		35,370		83		1,097,578		22,393		274
Risk participations	85,442		—		4		88,586		15		1
Mortgage banking - loan commitment	61,864		1,031		—		19,685		394		—
Mortgage banking - forward sales commitment	77,948		527		14		49,750		198		71
Bifurcated embedded derivatives	51,935		12,048		—		51,935		11,104		—
Dealer offsets to bifurcated embedded derivatives	51,935		—		13,634		51,935		—		12,839
Total	2,646,644		49,065		117,355		2,457,047		34,445		99,543

Total derivatives	$	3,432,930	$	65,697	$	117,355	$	2,577,047	$	50,636	$	99,543

Total gross derivative instruments			$	65,697	$	117,355			$	50,636	$	99,543
Less: Amounts subject to master netting agreements			(107)		(107)				(346)		(346)
Less: Cash collateral received/pledged			(54,548)		(14,179)				(38,386)		(13,089)
Net amount			$	11,042	$	103,069			$	11,904	$	86,108

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, 2023 and December 31, 2022, United utilized interest rate caps and swaps to hedge the variability of cash flows due to changes in interest rates on certain of its variable-rate subordinated debt and trust preferred securities. United considers these derivatives to be highly effective at achieving offsetting changes in cash flows attributable to changes in interest rates. Therefore, changes in the fair value of these derivative instruments are recognized in OCI. Gains and losses related to changes in fair value are reclassified into earnings in the periods the hedged forecasted transactions occur. Losses representing amortization of the premium recorded on cash flow hedges, which is a component excluded from the assessment of effectiveness, are recognized in earnings on a straight-line basis in the same caption as the hedged item over the term of the hedge. Over the next twelve months, United expects to reclassify $5.75 million of gains from AOCI into earnings related to these agreements.

Fair Value Hedges of Interest Rate Risk

United is exposed to changes in the fair value of certain of its fixed-rate investments and obligations due to changes in interest rates. United uses interest rate derivatives to manage its exposure to changes in fair value on these instruments attributable to changes in interest rates. For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in earnings. United includes the gain or loss on the hedged items in the same income statement line item as the offsetting loss or gain on the related derivatives. During the second

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

quarter of 2023, United entered into fair value hedges on stated amounts of closed portfolios of AFS debt securities using the portfolio layer method.

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


	Affected Income Statement Line Item	Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022



Fair value hedges:
Brokered time deposits:



Net income recognized	Interest expense- deposits	$	—	$	—	$	—	$	28
AFS securities:
Recognized on derivative interest settlements		$	3,011	$	—	$	5,321	$	—
Recognized on derivatives		9,139		—		23,028		—
Recognized on hedged items		(8,382)		—		(23,671)		—
Net income recognized	Interest revenue- investment securities	$	3,768	$	—	$	4,678	$	—




Cash flow hedges:
Long-term debt (1)	Interest expense- long term debt	$	42	$	(48)	$	2,098	$	(295)

(1) Includes premium amortization expense excluded from the assessment of hedge effectiveness of $119,000 for both the three months ended September 30, 2023 and 2022, respectively, and $348,000 and $353,000 for the nine months ended September 30, 2023 and 2022, respectively.

The table below presents the amortized cost of hedged AFS debt securities and cumulative fair value hedging basis adjustments for the periods presented (in thousands). All fair value hedges of AFS debt securities at September 30, 2023 were designated under the the portfolio layer method. At September 30, 2023, the aggregate designated hedged items using the portfolio layer method had a notional amount of $666 million.


	September 30, 2023
Balance Sheet Location	Amortized Cost(1)		Hedge Accounting Basis Adjustment
Debt securities AFS	$	797,177	$	(23,671)

(1) Excludes cumulative hedge accounting basis adjustment.

Derivatives Not Designated as Hedging Instruments

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

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

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

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

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


	Location of Gain (Loss) Recognized in Income on Derivatives	Amount of Gain (Loss) Recognized in Income on Derivatives
		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022

Customer derivatives and dealer offsets	Other noninterest income	$	789	$	471	$	1,701	$	1,685
Bifurcated embedded derivatives and dealer offsets	Other noninterest income	(651)		(108)		(1,658)		90


Mortgage banking derivatives	Mortgage loan revenue	1,034		1,047		2,435		8,297
Risk participations	Other noninterest income	19		(1)		161		93
		$	1,191	$	1,409	$	2,639	$	10,165

Credit-Risk-Related Contingent Features

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

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

Note 8 – Goodwill and Other Intangible Assets

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


	September 30, 2023		December 31, 2022
Core deposit intangible	$	104,174	$	46,900
Less: accumulated amortization	(36,638)		(26,112)
Net core deposit intangible	67,536		20,788
Customer relationship intangible	8,400		8,400
Less: accumulated amortization	(1,708)		(1,114)
Net customer relationship intangible	6,692		7,286
Total intangibles subject to amortization, net (1)	74,228		28,074
Goodwill	919,914		751,174
Total goodwill and other intangible assets, net	$	994,142	$	779,248

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

During the first quarter of 2023, as a result of the Progress acquisition, United recorded a core deposit intangible of $40.0 million. During the third quarter of 2023, as a result of the First Miami acquisition, United recorded a core deposit intangible of $18.0 million. See Note 4 for further details. Also during the third quarter of 2023, United reduced its core deposit intangible related to the Reliant acquisition by $656,000 as a result of the sale of core deposits in connection with a whole branch disposal.

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,
	2023		2022		2023		2022

Balance, beginning of period (1)	$	896,718	$	751,174	$	751,174	$	452,007
Acquisitions	23,196		—		168,740		299,167

Balance, end of period (1)	$	919,914	$	751,174	$	919,914	$	751,174

(1) Goodwill balances are shown net of accumulated impairment losses of $306 million incurred prior to 2022.

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

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



Remainder of 2023	$	4,030
2024	14,872
2025	12,774
2026	10,896
2027	9,018
Thereafter	22,638
Total	$	74,228

Note 9 – Preferred Stock

In May 2023, United’s Board of Directors approved a preferred stock repurchase program, authorizing United to repurchase up to $25.0 million of its outstanding Series I Non-Cumulative Preferred Stock directly or through the repurchase of depositary shares representing 1/1000th of a share of Series I Non-Cumulative Preferred Stock. The program is scheduled to expire on the earlier of the repurchase of preferred stock having an aggregate purchase price of $25.0 million or December 31, 2023. During the three and nine months ended September 30, 2023, 244,012 and 254,680 depositary shares were repurchased, respectively. As of September 30, 2023, United had remaining authorization to repurchase up to $19.7 million of outstanding preferred stock under the program.

Note 10 – Assets and Liabilities Measured at Fair Value

Fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering those assumptions, United uses a fair value hierarchy that distinguishes between 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 (unobservable inputs classified within Level 3 of the hierarchy). United has processes in place to review the significant valuation inputs and to reassess how the instruments are classified in the valuation framework.

Fair Value Hierarchy

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

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

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

In instances when the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

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

Investment Securities

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

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Deferred Compensation Plan Assets and Liabilities

Included in other assets in the consolidated balance sheet are assets purchased to provide returns to participants in the employee deferred compensation plan. These assets are mutual funds classified as Level 1. Deferred compensation liabilities, also classified as Level 1, are carried at the fair value of the obligation to the participant, which mirrors the fair value of the invested assets and is included in other liabilities in the consolidated balance sheet. Deferred compensation plan liabilities are unsecured general obligations of United.

Mortgage Loans Held for Sale

United has elected the fair value option for most of its newly originated mortgage loans held for sale in order to reduce certain timing differences and better match changes in fair values of the loans with changes in the value of derivative instruments used to economically hedge them. The fair value of mortgage loans held for sale is determined using quoted prices for a similar asset, adjusted for specific attributes of that loan, and are classified as Level 2. As of December 31, 2022, United had certain mortgage loans held for sale that were acquired from Reliant for which the fair value option was not elected; these loans were carried at the lower of aggregate cost or fair value. These loans were subsequently sold in 2023.

Derivative Financial Instruments

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

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

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

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

Servicing Rights for Residential and SBA/USDA Loans

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

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The table below presents United’s assets and liabilities measured at fair value on a recurring basis as of the dates indicated, aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands).


September 30, 2023	Level 1		Level 2		Level 3		Total
Assets:
AFS debt securities:
U.S. Treasuries	$	283,830	$	—	$	—	$	283,830
U.S. Government agencies & GSEs	—		224,695		—		224,695
State and political subdivisions	—		156,245		—		156,245
Residential MBS	—		1,546,422		—		1,546,422
Commercial MBS	—		602,060		—		602,060
Corporate bonds	—		192,626		2,179		194,805
Asset-backed securities	—		174,055		—		174,055
Equity securities with readily determinable fair values	8,400		1,576		—		9,976
Mortgage loans held for sale	—		37,110		—		37,110
Deferred compensation plan assets	12,436		—		—		12,436
Servicing rights for SBA/USDA loans	—		—		5,431		5,431
Residential mortgage servicing rights	—		—		38,234		38,234
Derivative financial instruments	—		52,618		13,079		65,697
Total assets	$	304,666	$	2,987,407	$	58,923	$	3,350,996

Liabilities:
Deferred compensation plan liability	$	12,476	$	—	$	—	$	12,476
Derivative financial instruments	—		103,717		13,638		117,355

Total liabilities	$	12,476	$	103,717	$	13,638	$	129,831


December 31, 2022	Level 1		Level 2		Level 3		Total
Assets:
AFS debt securities:
U.S. Treasuries	$	149,352	$	—	$	—	$	149,352
U.S. Government agencies & GSEs	—		250,116		—		250,116
State and political subdivisions	—		303,748		—		303,748
Residential MBS	—		1,795,481		—		1,795,481
Commercial MBS	—		671,912		—		671,912
Corporate bonds	—		210,240		2,212		212,452
Asset-backed securities	—		231,272		—		231,272
Equity securities with readily determinable fair values	12,278		1,359		—		13,637
Mortgage loans held for sale	—		11,794		—		11,794
Deferred compensation plan assets	11,436		—		—		11,436
Servicing rights for SBA/USDA loans	—		—		5,188		5,188
Residential mortgage servicing rights	—		—		36,559		36,559
Derivative financial instruments	—		39,123		11,513		50,636
Total assets	$	173,066	$	3,515,045	$	55,472	$	3,743,583

Liabilities:
Deferred compensation plan liability	$	11,460	$	—	$	—	$	11,460
Derivative financial instruments	—		86,703		12,840		99,543
Total liabilities	$	11,460	$	86,703	$	12,840	$	111,003

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).


	2023										2022
	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	$	11,872	$	12,564	$	6,148	$	37,194	$	2,183	$	10,199	$	10,795	$	6,167	$	35,131	$	2,287

Additions	—		—		525		826		—		—		—		411		704		—

Sales and settlements	—		—		(418)		(534)		—		—		—		(220)		(602)		—
Fair value adjustments included in OCI	—		—		—		—		(4)		—		—		—		—		(61)
Fair value adjustments included in earnings	1,207		1,074		(824)		748		—		1,819		2,866		(280)		1,921		—
Ending balance	$	13,079	$	13,638	$	5,431	$	38,234	$	2,179	$	12,018	$	13,661	$	6,078	$	37,154	$	2,226

Nine Months Ended September 30,
Beginning balance	$	11,513	$	12,840	$	5,188	$	36,559	$	2,212	$	6,758	$	5,048	$	6,513	$	25,161	$	2,395
Business combinations	—		—		95		—		—		—		—		—		—		—
Additions	—		170		1,449		2,306		—		—		99		1,799		4,594		—
Transfers from Level 3	—		—		—		—		—		(290)		—		—		—		—
Sales and settlements	(11)		—		(869)		(1,482)		—		—		(1)		(857)		(1,916)		—
Fair value adjustments included in OCI	—		—		—		—		(33)		—		—		—		—		(169)
Fair value adjustments included in earnings	1,577		628		(432)		851		—		5,550		8,515		(1,377)		9,315		—
Ending balance	$	13,079	$	13,638	$	5,431	$	38,234	$	2,179	$	12,018	$	13,661	$	6,078	$	37,154	$	2,226

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, 2023			December 31, 2022
			Range	Weighted Average		Range	Weighted Average
SBA/USDA loan servicing rights	Discounted cash flow	Discount rate	9.6% - 25.0%	16.5	%	11.9% - 25.0%	17.5	%
		Prepayment rate	4.2 - 36.7	17.8		0.0 - 35.4	16.4
Residential mortgage servicing rights	Discounted cash flow	Discount rate	10.0 - 12.5	10.1		9.5 - 11.5	9.5
		Prepayment rate	6.5 - 28.2	7.3		7.0 - 31.2	7.5
Corporate bonds	Discounted cash flow	Discount rate	6.8 - 7.3	7.1		6.1 - 6.4	6.3


Derivative assets - mortgage	Internal model	Pull through rate	60.0 - 100	89.2		26.5 - 100	90.7
Derivative assets and liabilities - other	Dealer priced	Dealer priced	N/A	N/A		N/A	N/A

Fair Value Option

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


Mortgage Loans Held for Sale
	September 30, 2023		December 31, 2022
Outstanding principal balance	$	36,317	$	11,473
Fair value	37,110		11,794

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)


Gain (Loss) from Change in Fair Value on Mortgage Loans Held for Sale
Location	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Mortgage loan gains and other related fees	$	209	$	(809)	$	473	$	(1,820)

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, 2023 and December 31, 2022, 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, 2023
Loans held for investment	$	—	$	—	$	37,236	$	37,236


December 31, 2022
Loans held for investment	$	—	$	—	$	7,808	$	7,808
Mortgage loans held for sale	—		—		1,806		1,806

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

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

Assets and Liabilities Not Measured at Fair Value

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

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

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

Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial instruments include the mortgage banking operation, brokerage network, deferred income

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

taxes, premises and equipment and goodwill. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

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

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


			Fair Value Level
	Carrying Amount		Level 1		Level 2		Level 3		Total
September 30, 2023
Assets:
HTM debt securities	$	2,518,773	$	17,266	$	1,975,098	$	—	$	1,992,364
Loans and leases, net	18,001,250		—		—		17,215,625		17,215,625


Liabilities:
Deposits	22,857,868		—		22,849,880		—		22,849,880

Long-term debt	324,786		—		—		307,234		307,234

December 31, 2022
Assets:
HTM debt securities	$	2,613,648	$	17,417	$	2,173,656	$	—	$	2,191,073
Loans and leases, net	15,175,270		—		—		14,609,239		14,609,239

Liabilities:
Deposits	19,876,507		—		19,863,380		—		19,863,380
FHLB advances	550,000		—		—		549,913		549,913
Long-term debt	324,663		—		—		313,380		313,380

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, 2023, 2.28 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, 2023.


	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, 2022	778,686	$	28.28			40,338	$	11.88
Granted	529,611	29.11				643,298	20.91
Released / Exercised	(264,031)	25.99		$	7,861	(271,124)	19.08			$	2,367

Cancelled	(50,110)	30.32				(4,620)	25.97
Outstanding at September 30, 2023	994,156	29.23		25,262		407,892	21.17		5.4	1,769

Vested / Exercisable at September 30, 2023	—	—				407,892	21.17		5.4	1,769

Options granted in 2023 reflect fully vested options assumed in the Progress acquisition, with the weighted average exercise price of Progress’ fully vested converted options determined pursuant to the purchase agreement. The value of the Progress options was determined using a Black-Scholes model and was included in the purchase price for the acquisition. No compensation expense relating to options was included in earnings for the nine months ended September 30, 2023 and 2022.

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

For the nine months ended September 30, 2023 and 2022, expense of $6.54 million and $6.24 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, 2023 and 2022, $555,000 and $412,000, 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 $1.81 million and $1.70 million was included in the determination of income tax expense for the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023, there was $23.7 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 2.7 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
	2023		2022		2023		2022
Realized losses on AFS securities:
	$	—	$	—	$	(1,644)	$	(3,688)	Securities losses, net
	—		—		374		979		Income tax benefit
	$	—	$	—	$	(1,270)	$	(2,709)	Net of tax

Amortization of unrealized losses on HTM securities transferred from AFS:
	$	(2,478)	$	(4,473)	$	(7,964)	$	(6,242)	Investment securities interest revenue
	593		1,073		1,917		1,495		Income tax benefit
	$	(1,885)	$	(3,400)	$	(6,047)	$	(4,747)	Net of tax

Reclassifications related to derivative instruments accounted for as cash flow hedges:
Interest rate contracts	$	42	$	(48)	$	2,098	$	(295)	Long-term debt interest expense

	(11)		12		(536)		75		Income tax (expense) benefit
	$	31	$	(36)	$	1,562	$	(220)	Net of tax




Amortization of defined benefit pension plan net periodic pension cost components:
Prior service cost	$	(61)	$	(91)	$	(183)	$	(276)	Salaries and employee benefits expense
Actuarial losses	—		(78)		—		(234)		Other expense

	(61)		(169)		(183)		(510)		Total before tax
	16		43		47		130		Income tax benefit
	$	(45)	$	(126)	$	(136)	$	(380)	Net of tax

Total reclassifications for the period	$	(1,899)	$	(3,562)	$	(5,891)	$	(8,056)	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,
	2023		2022		2023		2022
Net income	$	47,866	$	81,161	$	173,454	$	196,022
Dividends on preferred stock	(1,624)		(1,719)		(5,062)		(5,157)
Discount on preferred shares repurchased	792		—		792		—
Earnings allocated to participating securities	(259)		(407)		(939)		(1,007)
Net income available to common shareholders	$	46,775	$	79,035	$	168,245	$	189,858

Weighted average shares outstanding:
Basic	119,506		106,687		116,925		106,616
Effect of dilutive securities:
Stock options	95		38		141		40
Restricted stock units	23		75		18		76
Diluted	119,624		106,800		117,084		106,732

Net income per common share:
Basic	$	0.39	$	0.74	$	1.44	$	1.78
Diluted	$	0.39	$	0.74	$	1.44	$	1.78

At September 30, 2023, United excluded from the computation 1,968 potentially dilutive shares of common stock issuable upon exercise of stock options because of their antidilutive effect. At September 30, 2022, United had no potentially dilutive instruments outstanding that were not included in the computation.

Note 14 – Regulatory Matters

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

Regulatory capital ratios at September 30, 2023 and December 31, 2022, along with the minimum amounts required for capital adequacy purposes and to be well-capitalized under regulatory requirements in effect at such times, are presented below for United and the Bank (dollars in thousands):


					United Community Banks, Inc. (Consolidated)						United Community Bank
	Minimum (1)		Well- Capitalized		September 30, 2023			December 31, 2022			September 30, 2023			December 31, 2022
Risk-based ratios:
CET1 capital	4.5	%	6.5	%	12.15		%	12.26		%	12.26		%	12.83		%
Tier 1 capital	6.0		8.0		12.60			12.81			12.26			12.83
Total capital	8.0		10.0		14.45			14.79			13.25			13.70
Leverage ratio	4.0		5.0		9.70			9.69			9.43			9.69

CET1 capital					$	2,445,212		$	2,164,211		$	2,457,791		$	2,255,337
Tier 1 capital					2,535,495			2,260,633			2,457,791			2,255,337
Total capital					2,907,824			2,610,216			2,654,380			2,408,895
Risk-weighted assets					20,129,470			17,648,573			20,039,784			17,583,347
Average total assets for the leverage ratio					26,141,324			23,322,018			26,059,562			23,285,253

(1) As of September 30, 2023 and December 31, 2022 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, 2023		December 31, 2022
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit	$	4,608,549	$	4,683,790
Letters of credit	56,455		46,896

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

Tax Credit and Certain Equity Investments

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

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

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


	Balance Sheet Location	September 30, 2023		December 31, 2022
Investments in LIHTC:
Carrying amount	Other assets	$	50,432	$	50,054
Amount of future funding commitments included in carrying amount	Other liabilities	14,990		18,090
Renewable energy investments:
Carrying amount	Other assets	37,343		19,617
Amount of future funding commitments included in carrying amount	Other liabilities	15,795		18,781
Fintech funds and certain other equity method investments:
Carrying amount	Other assets	38,209		27,569
Amount of future funding commitments included in carrying amount	Other liabilities	5,786		470
Amount of future funding commitments not included in carrying amount	N/A	25,918		23,690

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 16 – Short-term Borrowings

At September 30, 2023 and December 31, 2022, short-term borrowings consisted of repurchase agreements, which are borrowings secured by investment securities. The following table presents the remaining contractual maturity of repurchase agreements by collateral pledged as of the date indicated (in thousands).


	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 days		Total
September 30, 2023

U.S. Government agencies & GSEs	37,348		—		—		—		37,348





Total	$	37,348	$	—	$	—	$	—	$	37,348

December 31, 2022
U.S. Treasuries	$	158,933	$	—	$	—	$	—	$	158,933






Total	$	158,933	$	—	$	—	$	—	$	158,933

United is obligated to promptly transfer additional securities if the market value of the pledged securities falls below the repurchase agreement price. United manages this risk by maintaining a portfolio of unpledged securities that it believes is sufficient to cover a decline in the market value of the securities sold under agreements to repurchase. At September 30, 2023, repurchase agreements were collateralized by securities with a carrying amount of $62.3 million. At December 31, 2022, repurchase agreements were collateralized by securities with a carrying amount of $163 million.

Note 17 - Subsequent Events

Preferred Share Repurchases

Subsequent to quarter-end through November 1, 2023, United repurchased 83,670 depositary shares (each representing 1/1000 interest in a share of preferred stock), bringing to a total 338,350 depositary shares repurchased to date through its preferred stock repurchase program. As of November 1, 2023, United had remaining authorization to repurchase up to $17.8 million of outstanding preferred stock under the program.

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

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

Overview

We offer a wide array of commercial and consumer banking services and investment advisory services primarily through a 205 branch network throughout Georgia, South Carolina, North Carolina, Tennessee, Florida and Alabama. We have grown organically as well as through strategic acquisitions. At September 30, 2023, we had consolidated total assets of $26.9 billion and 3,151 full-time equivalent employees.

Recent Developments

Mergers and Acquisitions

On January 3, 2023, we completed the acquisition of Progress, which operated 13 offices primarily located in Alabama and the Florida Panhandle. We acquired $1.90 billion of assets and assumed $1.60 billion of liabilities in the acquisition, which included $1.44 billion in loans and $1.33 billion in deposits. Progress results are included in the consolidated financial statements beginning on the acquisition date.

On July 1, 2023, we completed the acquisition of First Miami, which operated three offices in the Miami metropolitan area. We acquired $1.02 billion of assets and assumed $931 million of liabilities in the acquisition, which included $577 million in loans and $865 million in deposits. In addition to traditional banking products, First Miami offers private banking, trust and wealth management services with approximately $303 million in assets under administration as of September 30, 2023. First Miami’s results are included in the consolidated financial statements beginning on the acquisition date.

Discontinuance of LIBOR

Since the discontinuance of LIBOR that was effective immediately after June 30, 2023, our new adjustable rate loan production has been originated with an ARR, such as SOFR. All existing loans that had LIBOR as a reference rate converted to an ARR such as SOFR effective with the first rate reset after June 30, 2023.

Results of Operations

We reported net income and diluted earnings per common share of $47.9 million and $0.39, respectively, for the third quarter of 2023 compared to $81.2 million and $0.74, respectively, for the same period in 2022. Operating net income (non-GAAP), which excludes merger-related and other charges, was $55.0 million for the third quarter of 2023, compared to $82.5 million for the same period in 2022. The decrease in net income resulted primarily from higher noninterest expenses and an increase in provision for credit losses, which were partly offset by higher net interest revenue.

Net interest revenue increased to $203 million for the third quarter of 2023, compared to $200 million for the third quarter of 2022. The increase in interest revenue was provided by loan growth, including loans acquired from First Miami and Progress, and higher interest rates earned on our average loan and securities portfolios. The increase in interest revenue was offset by increases in interest expense resulting from higher rates paid on deposits, a less favorable deposit mix and utilization of wholesale borrowings, which are more costly than customer deposits. Our net interest spread decreased 116 basis points to 2.23%, reflecting a steeper increase in rates paid on deposits compared to that of loans since the third quarter of 2022. The impact of rising deposit rates also negatively impacted our net interest margin, which decreased to 3.24% for the third quarter of 2023 compared to 3.57% for the same period of last year.

We recorded a provision for credit losses of $30.3 million for the third quarter of 2023, compared to a provision of $15.4 million for the third quarter of 2022. The provision expense recorded in the third quarter of 2023 resulted from loan growth, the initial ACL for First Miami non-PCD loans and unfunded commitments of $4.00 million and current period net charge offs of $26.6 million. The provision for unfunded commitments for the quarter was a negative $3.51 million due to a decrease in the amount of unfunded commitments.

Noninterest income of $32.0 million for the third quarter of 2023 remained relatively flat compared to that of the third quarter of 2022. Increases in several of our noninterest income components, notably services charges and other fees, BOLI income, and wealth management fees, were mostly offset by a $3.25 million decrease in other noninterest income. The decrease in other noninterest income is mostly attributable to a $1.74 million increase in cash collateral losses related to our derivative instruments and a $1.00 million loss on the disposal of two of our Tennessee branches.

For the third quarter of 2023, noninterest expenses of $144 million increased $31.7 million, or 28%, compared to the same period of 2022. The increase was primarily attributable to a $13.4 million increase in salaries and employee benefits and a $7.42 million increase in merger-related and other charges, both of which were largely driven by the acquisitions of First Miami and Progress. Other contributors to the increase included increases in amortization of intangibles, which was driven by the addition of the First Miami and Progress core deposit intangibles, and FDIC assessment expense resulting from the increase in the assessment rate that went into effect on January 1, 2023.

For the nine months ended September 30, 2023 and 2022, we reported net income of $173 million and $196 million, respectively, and diluted earnings per common share of $1.44 and $1.78, respectively. Operating net income (non-GAAP) for the nine months ended September 30, 2023 and 2022 was $190 million and $210 million, respectively, which excludes merger-related and other charges for both periods. Net interest revenue and net interest margin for the nine months ended September 30, 2023 were $614 million and 3.41%, respectively, compared to $542 million and 3.25%, respectively, for the same period in 2022. In addition to the factors affecting the third quarter of 2023, results of operations for the nine months ended September 30, 2023 include a reduction in mortgage loan gains and other related fees of $12.2 million driven by a decrease in demand resulting from the rising interest rate environment. In addition, provision expense for the nine months ended September 30, 2023 and 2022 included initial provisions for credit losses on non-PCD loans and unfunded commitments acquired from Progress and Reliant of $10.4 million and $18.3 million, respectively.

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

Critical Accounting Estimates

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

Non-GAAP Reconciliation and Explanation

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


UNITED COMMUNITY BANKS, INC.
Table 1 - Financial Highlights

(in thousands, except per share data)
	2023									2022						Third Quarter 2023 - 2022 Change		For the Nine Months Ended September 30,						YTD Change
	Third Quarter			Second Quarter			First Quarter			Fourth Quarter			Third Quarter					2023			2022
INCOME SUMMARY
Interest revenue	$	323,147		$	295,775		$	279,487		$	240,831		$	213,887				$	898,409		$	572,324
Interest expense	120,591			95,489			68,017			30,943			14,113					284,097			29,855
Net interest revenue	202,556			200,286			211,470			209,888			199,774			1	%	614,312			542,469			13	%
Provision for credit losses	30,268			22,753			21,783			19,831			15,392					74,804			44,082
Noninterest income	31,977			36,387			30,209			33,354			31,922			—		98,573			104,353			(6)
Total revenue	204,265			213,920			219,896			223,411			216,304			(6)		638,081			602,740			6
Noninterest expenses	144,474			132,407			139,805			117,329			112,755			28		416,686			352,820			18
Income before income tax expense	59,791			81,513			80,091			106,082			103,549			(42)		221,395			249,920			(11)
Income tax expense	11,925			18,225			17,791			24,632			22,388			(47)		47,941			53,898			(11)
Net income	47,866			63,288			62,300			81,450			81,161			(41)		173,454			196,022			(12)
Merger-related and other charges	9,168			3,645			8,631			1,470			1,746					21,444			17,905
Income tax benefit of merger-related and other charges	(2,000)			(820)			(1,955)			(323)			(385)					(4,775)			(3,923)


Net income - operating (1)	$	55,034		$	66,113		$	68,976		$	82,597		$	82,522		(33)		$	190,123		$	210,004		(9)

PERFORMANCE MEASURES
Per common share:
Diluted net income - GAAP	$	0.39		$	0.53		$	0.52		$	0.74		$	0.74		(47)		$	1.44		$	1.78		(19)
Diluted net income - operating (1)	0.45			0.55			0.58			0.75			0.75			(40)		1.58			1.91			(17)
Cash dividends declared	0.23			0.23			0.23			0.22			0.22			5		0.69			0.64			8
Book value	25.87			25.98			25.76			24.38			23.78			9		25.87			23.78			9
Tangible book value (3)	17.70			17.83			17.59			17.13			16.52			7		17.70			16.52			7
Key performance ratios:
Return on common equity - GAAP (2)(4)	5.32		%	7.47		%	7.34		%	10.86		%	11.02		%			6.69		%	9.08		%
Return on common equity - operating (1)(2)(4)	6.14			7.82			8.15			11.01			11.21					7.35			9.75
Return on tangible common equity - operating (1)(2)(3)(4)	9.03			11.35			11.63			15.20			15.60					10.65			13.64
Return on assets - GAAP (4)	0.68			0.95			0.95			1.33			1.32					0.86			1.06
Return on assets - operating (1)(4)	0.79			1.00			1.06			1.35			1.34					0.95			1.13
Net interest margin (FTE) (4)	3.24			3.37			3.61			3.76			3.57					3.41			3.25
Efficiency ratio - GAAP	61.32			55.71			57.20			47.95			48.41					58.06			53.94
Efficiency ratio - operating (1)	57.43			54.17			53.67			47.35			47.66					55.07			51.20
Equity to total assets	11.85			11.89			11.90			11.25			11.12					11.85			11.12

Tangible common equity to tangible assets (3)	8.18			8.21			8.17			7.88			7.70					8.18			7.70


ASSET QUALITY


NPAs	$	90,883		$	103,737		$	73,403		$	44,281		$	35,511		156		$	90,883		$	35,511		156
ACL - loans	201,557			190,705			176,534			159,357			148,502			36		201,557			148,502			36

Net charge-offs	26,638			8,399			7,084			6,611			1,134					42,121			3,043
ACL - loans to loans	1.11		%	1.10		%	1.03		%	1.04		%	1.00		%			1.11		%	1.00		%

Net charge-offs to average loans (4)	0.59			0.20			0.17			0.17			0.03					0.32			0.03
NPAs to total assets	0.34			0.40			0.28			0.18			0.15					0.34			0.15











AT PERIOD END ($ in millions)
Loans	$	18,203		$	17,395		$	17,125		$	15,335		$	14,882		22		$	18,203		$	14,882		22
Investment securities	5,701			5,914			5,915			6,228			6,539			(13)		5,701			6,539			(13)
Total assets	26,869			26,120			25,872			24,009			23,688			13		26,869			23,688			13
Deposits	22,858			22,252			22,005			19,877			20,321			12		22,858			20,321			12
Shareholders’ equity	3,184			3,106			3,078			2,701			2,635			21		3,184			2,635			21
Common shares outstanding (thousands)	118,976			115,266			115,152			106,223			106,163			12		118,976			106,163			12

(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)
	2023									2022						For the Nine Months Ended September 30,
	Third Quarter			Second Quarter			First Quarter			Fourth Quarter			Third Quarter			2023			2022
Noninterest expense reconciliation
Noninterest expenses (GAAP)	$	144,474		$	132,407		$	139,805		$	117,329		$	112,755		$	416,686		$	352,820
Merger-related and other charges	(9,168)			(3,645)			(8,631)			(1,470)			(1,746)			(21,444)			(17,905)
Noninterest expenses - operating	$	135,306		$	128,762		$	131,174		$	115,859		$	111,009		$	395,242		$	334,915

Net income reconciliation
Net income (GAAP)	$	47,866		$	63,288		$	62,300		$	81,450		$	81,161		$	173,454		$	196,022
Merger-related and other charges	9,168			3,645			8,631			1,470			1,746			21,444			17,905
Income tax benefit of merger-related and other charges	(2,000)			(820)			(1,955)			(323)			(385)			(4,775)			(3,923)


Net income - operating	$	55,034		$	66,113		$	68,976		$	82,597		$	82,522		$	190,123		$	210,004

Diluted income per common share reconciliation
Diluted income per common share (GAAP)	$	0.39		$	0.53		$	0.52		$	0.74		$	0.74		$	1.44		$	1.78
Merger-related and other charges, net of tax	0.06			0.02			0.06			0.01			0.01			0.14			0.13


Diluted income per common share - operating	$	0.45		$	0.55		$	0.58		$	0.75		$	0.75		$	1.58		$	1.91

Book value per common share reconciliation
Book value per common share (GAAP)	$	25.87		$	25.98		$	25.76		$	24.38		$	23.78		$	25.87		$	23.78
Effect of goodwill and other intangibles	(8.17)			(8.15)			(8.17)			(7.25)			(7.26)			(8.17)			(7.26)
Tangible book value per common share	$	17.70		$	17.83		$	17.59		$	17.13		$	16.52		$	17.70		$	16.52

Return on tangible common equity reconciliation
Return on common equity (GAAP)	5.32		%	7.47		%	7.34		%	10.86		%	11.02		%	6.69		%	9.08		%
Merger-related and other charges, net of tax	0.82			0.35			0.81			0.15			0.19			0.66			0.67


Return on common equity - operating	6.14			7.82			8.15			11.01			11.21			7.35			9.75
Effect of goodwill and other intangibles	2.89			3.53			3.48			4.19			4.39			3.30			3.89
Return on tangible common equity - operating	9.03		%	11.35		%	11.63		%	15.20		%	15.60		%	10.65		%	13.64		%

Return on assets reconciliation
Return on assets (GAAP)	0.68		%	0.95		%	0.95		%	1.33		%	1.32		%	0.86		%	1.06		%
Merger-related and other charges, net of tax	0.11			0.05			0.11			0.02			0.02			0.09			0.07


Return on assets - operating	0.79		%	1.00		%	1.06		%	1.35		%	1.34		%	0.95		%	1.13		%

Efficiency ratio reconciliation
Efficiency ratio (GAAP)	61.32		%	55.71		%	57.20		%	47.95		%	48.41		%	58.06		%	53.94		%
Merger-related and other charges	(3.89)			(1.54)			(3.53)			(0.60)			(0.75)			(2.99)			(2.74)
Efficiency ratio - operating	57.43		%	54.17		%	53.67		%	47.35		%	47.66		%	55.07		%	51.20		%

Tangible common equity to tangible assets reconciliation
Equity to total assets (GAAP)	11.85		%	11.89		%	11.90		%	11.25		%	11.12		%	11.85		%	11.12		%
Effect of goodwill and other intangibles	(3.33)			(3.31)			(3.36)			(2.97)			(3.01)			(3.33)			(3.01)

Effect of preferred equity	(0.34)			(0.37)			(0.37)			(0.40)			(0.41)			(0.34)			(0.41)
Tangible common equity to tangible assets	8.18		%	8.21		%	8.17		%	7.88		%	7.70		%	8.18		%	7.70		%

Net Interest Revenue

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

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

For the quarter:

FTE net interest revenue for the third quarter of 2023 was $204 million, representing an increase of $2.63 million from the same period in 2022. The increase was primarily driven by the $3.40 billion increase in average loans and a 131 basis point increase in the average rate earned on loans. As a result, loan interest revenue increased $99.6 million compared to the third quarter of 2022. Approximately $3.38 million of the increase was a result of higher purchased loan accretion, which was mostly driven by the addition of First Miami and Progress loans. The FOMC raised the targeted federal funds rate a total of 525 basis points beginning in March 2022 through the third quarter of 2023. Additionally, the increase in yield earned on the investment securities portfolio, partially offset by a decrease in the average balance of the portfolio, contributed $7.49 million in additional FTE interest revenue compared to the same period of last year. The increase in yield on the securities portfolio was positively impacted by the fair value hedges on our AFS securities portfolio that we entered into in the second quarter of 2023, which contributed $3.77 million in additional interest revenue.

Interest expense for the third quarter of 2023 increased $106 million compared to the same quarter of 2022. The increase is mostly attributable to the 259 basis point increase in rates paid on average interest-bearing deposits as a result of the rising interest rate environment and a deposit mix more heavily comprised of more costly time deposits and brokered time deposits. In addition, the daily average balance of interest-bearing deposits increased by $3.50 billion, which includes approximately $1.54 billion of interest-bearing deposits received in the acquisitions of First Miami and Progress. We also saw attrition in our noninterest-bearing deposit balances as rising interest rates offered customers more attractive alternatives, which negatively impacts our net interest margin. As a result of the decrease in noninterest-bearing deposits, in the third quarter of 2023, 65% of our interest earning assets were funded by interest-bearing liabilities compared with 57% for the same period of 2022.

Our net interest spread decreased 116 basis points to 2.23% and our net interest margin decreased 33 basis points to 3.24%, reflecting a steeper increase in rates paid on deposits compared to that of loans during the third quarter of 2023. The fact that our net interest spread fell much more than our net interest margin demonstrates the increasing contribution and value of noninterest-bearing funding sources in a higher interest rate environment.

For the nine months ended:

FTE net interest revenue for the first nine months of 2023 was $617 million, representing a 13% increase from the first nine months of 2022, which was primarily driven by the same factors impacting the quarter. During the first nine months of 2023, our net interest spread decreased 62 basis points and our net interest margin increased by 16 basis points compared to the same period of 2022. Our net interest margin for the nine months ended September 30, 2023 benefited from higher purchased loan accretion of $6.19 million and $4.68 million in additional interest revenue from the fair value hedges on our AFS securities portfolio.


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


	2023						2022
	Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate
Assets:
Interest-earning assets:
Loans, net of unearned income (FTE) (1)(2)	$	18,055,402	$	273,800	6.02	%	$	14,658,397	$	174,168	4.71	%
Taxable securities (3)	5,933,708		43,007		2.90		6,539,615		34,385		2.10
Tax-exempt securities (FTE) (1)(3)	368,148		2,313		2.51		493,115		3,449		2.80
Federal funds sold and other interest-earning assets	538,039		5,093		3.76		614,755		3,106		2.00
Total interest-earning assets (FTE)	24,895,297		324,213		5.17		22,305,882		215,108		3.83

Noninterest-earning assets:
Allowance for credit losses	(209,472)						(138,907)
Cash and due from banks	225,831						231,376
Premises and equipment	367,217						290,768
Other assets (3)	1,568,824						1,261,236
Total assets	$	26,847,697					$	23,950,355

Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Interest-bearing deposits:
NOW and interest-bearing demand	$	5,285,513	35,613		2.67		$	4,335,619	3,992		0.37
Money market	5,622,355		46,884		3.31		4,849,705		4,503		0.37
Savings	1,301,047		868		0.26		1,515,350		178		0.05
Time	3,473,191		31,072		3.55		1,635,580		984		0.24
Brokered time deposits	209,119		2,296		4.36		51,530		223		1.72
Total interest-bearing deposits	15,891,225		116,733		2.91		12,387,784		9,880		0.32

Federal funds purchased and other borrowings	44,164		189		1.70		3,442		27		3.11
Federal Home Loan Bank advances	—		—		—		—		—		—
Long-term debt	324,770		3,669		4.48		324,444		4,206		5.14
Total borrowed funds	368,934		3,858		4.15		327,886		4,233		5.12
Total interest-bearing liabilities	16,260,159		120,591		2.94		12,715,670		14,113		0.44

Noninterest-bearing liabilities:
Noninterest-bearing deposits	6,916,272						8,176,987
Other liabilities	435,592						349,647
Total liabilities	23,612,023						21,242,304
Shareholders' equity	3,235,674						2,708,051
Total liabilities and shareholders' equity	$	26,847,697					$	23,950,355

Net interest revenue (FTE)			$	203,622					$	200,995
Net interest-rate spread (FTE)					2.23	%					3.39	%
Net interest margin (FTE) (4)					3.24	%					3.57	%

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

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

(3)Unrealized losses on securities, including those related to the transfer from AFS to HTM, have been reclassified to other assets. Pretax unrealized losses of $430 million and $318 million in 2023 and 2022, respectively, are included in other assets for purposes of this presentation.

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


Table 3 - Average Consolidated Balance Sheets and Net Interest Analysis
For the Nine Months Ended September 30,
(dollars in thousands, (FTE))


	2023						2022
	Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate
Assets:
Interest-earning assets:
Loans, net of unearned income (FTE) (1)(2)	$	17,377,210	$	760,802	5.85	%	$	14,426,470	$	475,989	4.41	%
Taxable securities (3)	5,982,615		120,212		2.68		6,274,230		83,281		1.77
Tax-exempt securities (FTE) (1)(3)	386,499		7,470		2.58		498,177		10,425		2.79
Federal funds sold and other interest-earning assets	490,703		13,103		3.57		1,271,287		6,192		0.65
Total interest-earning assets (FTE)	24,237,027		901,587		4.97		22,470,164		575,887		3.43

Non-interest-earning assets:
Allowance for loan losses	(186,428)						(129,278)
Cash and due from banks	249,411						200,463
Premises and equipment	347,514						284,850
Other assets (3)	1,518,503						1,308,647
Total assets	$	26,166,027					$	24,134,846

Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Interest-bearing deposits:
NOW and interest-bearing demand	$	4,891,214	80,809		2.21		$	4,520,079	7,624		0.23
Money market	5,349,265		105,430		2.64		4,992,357		7,030		0.19
Savings	1,341,033		2,108		0.21		1,483,169		337		0.03
Time	2,936,873		65,856		3.00		1,688,250		2,009		0.16
Brokered time deposits	280,293		9,608		4.58		65,133		313		0.64
Total interest-bearing deposits	14,798,678		263,811		2.38		12,748,988		17,313		0.18
Federal funds purchased and other borrowings	98,884		3,186		4.31		1,383		27		2.61
Federal Home Loan Bank advances	166,355		5,761		4.63		—		—		—
Long-term debt	324,737		11,339		4.67		322,600		12,515		5.19
Total borrowed funds	589,976		20,286		4.60		323,983		12,542		5.18
Total interest-bearing liabilities	15,388,654		284,097		2.47		13,072,971		29,855		0.31

Noninterest-bearing liabilities:
Noninterest-bearing deposits	7,226,096						7,958,392
Other liabilities	393,048						375,182
Total liabilities	23,007,798						21,406,545
Shareholders' equity	3,158,229						2,728,301
Total liabilities and shareholders' equity	$	26,166,027					$	24,134,846

Net interest revenue (FTE)			$	617,490					$	546,032
Net interest-rate spread (FTE)					2.50	%					3.12	%
Net interest margin (FTE) (4)					3.41	%					3.25	%

(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 $413 million and $221 million in 2023 and 2022, respectively, are included in other assets for purposes of this presentation.

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

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, 2023						Nine Months Ended September 30, 2023
	Compared to 2022 Increase (Decrease) Due to Changes in
	Volume		Rate		Total		Volume		Rate		Total
Interest-earning assets:
Loans (FTE)	$	45,449	$	54,183	$	99,632	$	109,607	$	175,206	$	284,813
Taxable securities	(3,423)		12,045		8,622		(4,036)		40,967		36,931
Tax-exempt securities (FTE)	(811)		(325)		(1,136)		(2,204)		(751)		(2,955)
Federal funds sold and other interest-earning assets	(424)		2,411		1,987		(5,874)		12,785		6,911
Total interest-earning assets (FTE)	40,791		68,314		109,105		97,493		228,207		325,700

Interest-bearing liabilities:
NOW and interest-bearing demand accounts	1,060		30,561		31,621		677		72,508		73,185
Money market accounts	829		41,552		42,381		538		97,862		98,400
Savings deposits	(29)		719		690		(35)		1,806		1,771
Time deposits	2,255		27,833		30,088		2,541		61,306		63,847
Brokered deposits	1,380		693		2,073		3,254		6,041		9,295
Total interest-bearing deposits	5,495		101,358		106,853		6,975		239,523		246,498

Federal funds purchased & other borrowings	180		(18)		162		3,130		29		3,159
FHLB advances	—		—		—		5,761		—		5,761
Long-term debt	4		(541)		(537)		82		(1,258)		(1,176)
Total borrowed funds	184		(559)		(375)		8,973		(1,229)		7,744
Total interest-bearing liabilities	5,679		100,799		106,478		15,948		238,294		254,242

Increase in net interest revenue (FTE)	$	35,112	$	(32,485)	$	2,627	$	81,545	$	(10,087)	$	71,458

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. The provision for credit losses 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.

We recorded a provision for credit losses of $30.3 million and $74.8 million for the three and nine months ended September 30, 2023, compared to $15.4 million and $44.1 million for the same periods of 2022.

The increase in provision during three and nine months ended September 30, 2023 was primarily due to a $19.0 million loss related to one relationship with a wholesale oil distributor that was part of a $218 million nationally syndicated credit, in which United’s participation was 8.7%. The borrower filed for Chapter 11 bankruptcy in March of 2023, at which time we placed the credit on nonaccrual status and included it in NPAs. When the bankruptcy converted to a Chapter 7 liquidation in August of 2023, the loan was charged off in full with no significant recovery expected.

Additionally, during the third quarter of 2023, we recorded the initial provision for credit losses on First Miami non-PCD loans and unfunded commitments of $3.92 million and $84,000, respectively. The provision recorded for the first nine months of 2023 also included the initial provision for credit losses on Progress non-PCD loans and unfunded commitments of $8.80 million and $1.65 million, respectively. Thus, the 2023 year to date initial provision for credit losses on loans and unfunded commitments resulting from acquisitions totaled $14.5 million, compared to 2022, which included $18.3 million related to the acquisition of Reliant. The remaining increase in provision expense for the three and nine months ended September 30, 2023 reflects organic loan growth, a weaker economic forecast and higher net charge-offs relative to the same periods of 2022.

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

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
	2023		2022		Amount		Percent		2023		2022		Amount		Percent
Overdraft fees	$	3,214	$	2,778	$	436	16	%	$	8,470	$	8,038	$	432	5	%
ATM and debit card fees	4,145		3,857		288		7		11,857		12,038		(181)		(2)
Other service charges and fees	2,956		2,934		22		1		8,464		8,568		(104)		(1)
Total service charges and fees	10,315		9,569		746		8		28,791		28,644		147		1
Mortgage loan gains and related fees	6,159		6,297		(138)		(2)		17,264		29,420		(12,156)		(41)
Wealth management fees	6,451		5,879		572		10		17,775		17,759		16		—
Gains on sales of other loans	2,688		2,228		460		21		6,909		9,226		(2,317)		(25)
Lending and loan servicing fees	2,985		2,946		39		1		9,979		7,518		2,461		33
Securities losses, net	—		—		—				(1,644)		(3,688)		2,044
Other noninterest income:
Customer derivatives	806		470		336		71		1,963		1,790		173		10
Other investment gains (losses)	(1,245)		(1,492)		247				909		(3,333)		4,242
BOLI	2,711		2,020		691		34		6,007		5,241		766		15
Treasury management income	1,372		1,022		350		34		3,623		2,739		884		32
Other	(265)		2,983		(3,248)		(109)		6,997		9,037		(2,040)		(23)
Total other noninterest income	3,379		5,003		(1,624)		(32)		19,499		15,474		4,025		26
Total noninterest income	$	31,977	$	31,922	$	55	—		$	98,573	$	104,353	$	(5,780)	(6)

The increase in total service charges and fees was driven by the acquisitions of Progress and First Miami since the third quarter of 2022 and increases in transaction volume from existing customers. Overdraft fees for the nine months ended September 30, 2023 reflect the elimination of a returned item fee effective July 1, 2022.

Mortgage loan gains and related fees consist primarily of fees earned in our mortgage origination business, including secondary market gains on sales, derivative hedging gains and losses and fair value adjustments to our mortgage loans held for sale. It also includes our mortgage servicing business which includes servicing fees and fair value adjustments on our 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 the origination income on mortgages when customers enter into mortgage rate lock commitments, making our rate lock volume a significant driver of mortgage gains in any given period.

The decrease in mortgage loan gains and related fees in the first nine months of 2023 was driven by higher interest rates which reduced demand compared to same period of 2022, as shown in the following table. In addition, during the first nine months of 2023, we recorded a $623,000 negative fair value adjustment, including decay, to the mortgage servicing rights asset, compared to a $7.40 million positive fair value adjustment, including decay, during the first nine months of 2022.


Table 6 - Selected Mortgage Metrics
(dollars in thousands)
	Three Months Ended September 30,						Nine Months Ended September 30,
	2023		2022		% Change		2023		2022		% Change
Mortgage rate locks	$	304,415	$	456,186	(33)	%	$	943,886	$	1,810,839	(48)	%
# of mortgage rate locks	846		1,213		(30)		2,668		4,622		(42)

Mortgage loans sold	$	108,420	$	93,183	16		$	329,444	$	460,232	(28)
# of mortgage loans sold	377		379		(1)		1,154		1,812		(36)

Mortgage loans originated:
Purchases	$	184,608	$	269,743	(32)		$	610,036	$	977,562	(38)
Refinances	26,860		47,533		(43)		89,339		300,128		(70)
Total	$	211,468	$	317,276	(33)		$	699,375	$	1,277,690	(45)

# of mortgage loans originated	614		841		(27)		1,969		3,243		(39)

Wealth management income for the three and nine months ended September 30, 2023 includes income from assets under management acquired in the First Miami transaction, which contributed approximately $600,000 to the periods presented.

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


Table 7 - Other Loan Sales
(in thousands)
	Three Months Ended September 30,								Nine Months Ended September 30,
	2023				2022				2023				2022
	Loans Sold		Gain		Loans Sold		Gain		Loans Sold		Gain		Loans Sold		Gain
Guaranteed portion of SBA/USDA loans	$	26,381	$	1,545	$	20,405	$	1,535	$	70,223	$	4,635	$	87,867	$	7,108
Equipment financing receivables	37,671		1,143		21,557		693		76,945		2,274		65,534		2,118
Total	$	64,052	$	2,688	$	41,962	$	2,228	$	147,168	$	6,909	$	153,401	$	9,226

Lending and loan servicing fees for the nine months ended September 30, 2023 increased compared to the same period of 2022 as a result of more favorable fair market value adjustments on our SBA loan servicing asset and an increase in fees generated by our equipment finance business. During the nine months ended September 30, 2023, we recorded negative fair value adjustments on our SBA servicing asset of $1.30 million compared to $2.14 million for the same period of 2022. Conversely, during the third quarter of 2023 we recorded a larger negative SBA servicing asset fair value adjustment of $1.24 million compared to $501,000 in the third quarter of 2022, which offset the increases in equipment finance fee income during the period.

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

The change in other noninterest income for the three and nine months ended September 30, 2023 compared to the same periods of 2022 was primarily driven by the following factors:

•During the third quarter and first nine months of 2023, we recorded net unrealized gains on deferred compensation plan assets and fintech and limited partnership investments, which were partially offset by unrealized losses on equity securities. For the same periods of 2022, we recorded net unrealized losses on deferred compensation plan assets, equity securities and fintech investments, which were partially offset by unrealized gains on limited partnership investments.

•The increase in BOLI income for the three and nine months ended September 30, 2023 compared to the same periods of 2022 is mostly due to the additional policies that were obtained in connection with the Progress acquisition. Additionally, BOLI income for the 2023 periods presented includes a death benefit gain of approximately $1.03 million. During the nine months ended September 30, 2022, we recorded gains of $1.37 million.

•Other income for the quarter includes a $1.00 million loss on the disposal of two of our Tennessee branches, which mainly resulted from a $656,000 write down of the core deposit intangible associated with deposits sold in the transaction as well as losses on the buildings. In addition, we recorded collateral charges related to our derivative positions of $1.99 million and $3.31 million during the three and nine months ended September 30, 2023, respectively. This represents $1.74 million and $2.99 million increases compared to the same periods of 2022. The nine months ended September 30, 2023 also includes the gain on sale of a commercial insurance book of business of $1.59 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
	2023		2022		Amount		Percent		2023		2022		Amount		Percent
Salaries and employee benefits	$	81,173	$	67,823	$	13,350	20	%	$	236,121	$	208,062	$	28,059	13	%
Communications and equipment	10,902		8,795		2,107		24		31,654		27,718		3,936		14
Occupancy	10,941		9,138		1,803		20		31,024		27,381		3,643		13
Advertising and public relations	2,251		2,544		(293)		(12)		6,914		6,332		582		9
Postage, printing and supplies	2,386		2,190		196		9		7,305		6,308		997		16
Professional fees	7,006		4,821		2,185		45		19,670		14,670		5,000		34
Lending and loan servicing expense	2,697		2,333		364		16		7,546		7,746		(200)		(3)
Outside services - electronic banking	2,561		3,159		(598)		(19)		8,646		8,629		17		—
FDIC assessments and other regulatory charges	4,314		2,356		1,958		83		12,457		6,796		5,661		83
Amortization of intangibles	4,171		1,678		2,493		149		11,120		5,207		5,913		114
Other	6,904		6,172		732		12		22,785		16,066		6,719		42
Total excluding merger-related and other charges	135,306		111,009		24,297		22		395,242		334,915		60,327		18
Merger-related and other charges	9,168		1,746		7,422				21,444		17,905		3,539

Total noninterest expenses	$	144,474	$	112,755	$	31,719	28		$	416,686	$	352,820	$	63,866	18

The increase in salaries and employee benefits for the third quarter and first nine months of 2023 compared to the same periods of 2022 was primarily driven by the addition of Progress and First Miami employees and expansion of existing teams in our footprint. Full-time equivalent headcount totaled 3,151 at September 30, 2023, up from 2,826 at September 30, 2022, which represents a 12% increase. The increase also reflects our annual merit-based salary increases awarded at the beginning of the second quarter of 2023. These increases were partially offset by a reduction in commissions expense, primarily due to reduced mortgage production volume, as well as reduction in our bonus accrual and lower deferred origination costs.

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 2023 compared to the same periods of 2022 was mostly attributable to the additional operating lease costs associated with Progress and First Miami.

Professional fees increased for the third quarter and first nine months of 2023 compared to the same periods of 2022 mostly as a result of increased legal and consulting fees. The increase also reflects pre-conversion systems expense from the Progress and First Miami acquisitions.

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

Amortization of intangibles increased with the additional customer deposit intangibles recorded as a result of the Progress and First Miami acquisitions.

Increases in other noninterest expense were partly attributable to increases in fraud losses and travel expenses for the first nine months of 2023.

Merger-related and other charges for the third quarter and first nine months of 2023 were primarily related to the acquisitions of Progress and First Miami, branch closure costs and rebranding expenses.

Balance Sheet Review

Total assets at September 30, 2023 and December 31, 2022 were $26.9 billion and $24.0 billion, respectively. Total liabilities at September 30, 2023 and December 31, 2022 were $23.7 billion and $21.3 billion, respectively. Shareholders’ equity totaled $3.18 billion and $2.70 billion at September 30, 2023 and December 31, 2022, 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, 2023, of which approximately 75% was secured by real estate.

Table 9 - Loan Portfolio Composition

As of September 30, 2023

Asset Quality and Risk Elements

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

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

The ACL reflects our assessment of the life of loan expected credit losses in the loan portfolio and unfunded loan commitments. This assessment involves uncertainty and judgment and is subject to change in future periods. The amount of any changes could be significant if our assessment of loan quality or collateral values changes substantially with respect to one or more loan relationships or portfolios. The allocation of the ACL is based on reasonable and supportable forecasts, historical data, subjective judgment and

estimates and therefore, is not necessarily indicative of the specific amounts or loan categories in which charge-offs may ultimately occur. See the Critical Accounting Estimates section of MD&A in our 2022 10-K for additional information on the ACL.

Table 10 - Allocation of ACL

(in thousands)



	September 30, 2023				December 31, 2022
	ACL			% of loans in each category to total loans	ACL			% of loans in each category to total loans
Owner occupied commercial real estate	$	23,984		18	$	19,834		18
Income producing commercial real estate	45,588			23	32,082			21
Commercial & industrial	31,217			14	23,504			15
Commercial construction	20,639			10	20,120			10
Equipment financing	30,362			8	23,395			9
Total commercial	151,790			73	118,935			73
Residential mortgage	26,884			17	20,809			15
Home equity	9,799			5	8,707			6
Residential construction	2,874			2	2,049			3
Manufactured housing	9,378			2	8,098			2
Consumer	832			1	759			1
Total ACL - loans	201,557			100	159,357			100
ACL - unfunded commitments	18,067				21,163
Total ACL	$	219,624			$	180,520

ACL - loans as a percentage of total loans	1.11		%		1.04		%

ACL - loans as a percentage of nonaccrual loans	224				360

The increase in the total ACL since December 31, 2022 was partially driven by a weaker economic forecast and the initial ACL established for loans and unfunded commitments acquired in connection with the Progress and First Miami transactions on January 3, 2023 and July 1, 2023, respectively. The initial ACL for Progress loans and unfunded commitments totaled $11.5 million and $1.65 million, respectively. The initial ACL for First Miami loans and unfunded commitment totaled $7.64 million and $84,000, respectively. The impact of the acquisitions on the ACL for unfunded commitments was more than offset by the overall decrease in unfunded commitments, which resulted in a negative provision for unfunded commitments of $3.10 million for the nine months ended September 30, 2023. 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,
	2023			2022			2023			2022






Net charge-offs (recoveries)
Owner occupied commercial real estate	$	582		$	(90)		$	467		$	(1,631)
Income producing commercial real estate	3,011			176			6,501			(230)
Commercial & industrial	17,542			(744)			20,513			1,883
Commercial construction	(49)			10			(191)			(507)
Equipment financing	6,325			1,121			12,237			2,295
Residential mortgage	(129)			(66)			(259)			(214)
Home equity	(2,784)			(102)			(2,810)			(529)
Residential construction	341			(109)			949			(208)
Manufactured housing	1,168			220			2,416			519
Consumer	631			718			2,298			1,665
Total net charge-offs	$	26,638		$	1,134		$	42,121		$	3,043

Average loans
Owner occupied commercial real estate	$	3,240,648		$	2,680,906		$	3,136,798		$	2,650,505
Income producing commercial real estate	3,956,141			3,274,246			3,719,663			3,291,809
Commercial & industrial	2,563,692			2,237,096			2,497,002			2,285,443
Commercial construction	1,820,224			1,508,481			1,785,226			1,487,598
Equipment financing	1,544,284			1,241,322			1,494,726			1,184,201
Residential mortgage	3,017,081			2,065,662			2,832,109			1,930,781
Home equity	947,027			813,637			932,424			791,673
Residential construction	437,235			400,680			466,201			382,549
Manufactured housing	346,518			292,648			337,578			278,449
Consumer	182,552			143,719			175,483			143,462
Total average loans	$	18,055,402		$	14,658,397		$	17,377,210		$	14,426,470

Net charge-offs to average loans (1)
Owner occupied commercial real estate	0.07		%	(0.01)		%	0.02		%	(0.08)		%
Income producing commercial real estate	0.30			0.02			0.23			(0.01)
Commercial & industrial	2.71			(0.13)			1.10			0.11
Commercial construction	(0.01)			—			(0.01)			(0.05)
Equipment financing	1.62			0.36			1.09			0.26
Residential mortgage	(0.02)			(0.01)			(0.01)			(0.01)
Home equity	(1.17)			(0.05)			(0.40)			(0.09)
Residential construction	0.31			(0.11)			0.27			(0.07)
Manufactured housing	1.34			0.30			0.96			0.25
Consumer	1.37			1.98			1.75			1.55
Total	0.59			0.03			0.32			0.03

(1) Annualized.

Nonperforming Assets

The table below summarizes NPAs for the periods indicated. NPAs include nonaccrual loans, OREO and repossessed assets. The increase in nonaccrual loans since December 31, 2022 is primarily driven by a small population of large commercial loans that moved to nonaccrual status and an increase in nonaccrual manufactured housing loans during the first nine months of 2023, which contributed to $46.4 million and $9.50 million of the increase, respectively. Additionally in the third quarter of 2023, $7.91 million of equipment financing loans moved to nonaccrual status. These additions were partially offset by reductions in nonaccrual loans resulting from repayments, payoffs, and charge-offs as well as loans returning to accrual status. Most notably, during the third quarter of 2023, we charged off $19.0 million in nonaccrual loans related to one relationship, which contributed to the decrease in NPAs since the second quarter of 2023.


Table 12 - NPAs
(in thousands)


	September 30, 2023			December 31, 2022
Nonaccrual loans	89,818			44,232

OREO and repossessed assets	1,065			49
Total NPAs	$	90,883		$	44,281

Nonaccrual loans as a percentage of total loans	0.49		%	0.29		%

NPAs as a percentage of total assets	0.34			0.18

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

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

Investment Securities

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

Table 13 - Investment Securities

(in thousands)


	September 30, 2023					December 31, 2022
	Carrying Value			% of portfolio		Carrying Value			% of portfolio		$ Change
AFS	$	3,182,112		56	%	$	3,614,333		58	%	$	(432,221)
HTM	2,518,773			44		2,613,648			42		(94,875)
Total investment securities	$	5,700,885				$	6,227,981				$	(527,096)

Investment securities as a % of total assets	21		%			26		%

Table 14 - Investment Securities Portfolio Composition

As of September 30, 2023

(in thousands)

In the first quarter of 2023, we sold $381 million in AFS securities, including approximately $111 million in securities received through the Progress acquisition, primarily for the purpose of providing liquidity to fund loan growth. For the same reason, during the third quarter of 2023, we sold approximately $215 million in securities received through the First Miami acquisition.

During the second quarter of 2023, we entered into a fair value hedge on a portion of our AFS securities portfolio in order to mitigate the impact of any potential future unrealized losses on our tangible common equity. The notional value of the securities hedged totaled $666 million as of September 30, 2023. Gains and losses related to the hedge and hedged item are reflected in investment securities interest income. During the third quarter of 2023, we recorded net gains on the hedge and hedged item of $3.77 million, including interest accruals. See Note 7 to the financial statements for further detail.

At September 30, 2023, HTM debt securities had a fair value of $1.99 billion, indicating net unrealized losses of $526 million. Additional unrealized losses on HTM debt securities of $70.4 million (pre-tax) were included in AOCI as a result of the transfer of AFS debt securities to HTM in 2022. Unrealized losses were primarily attributable to changes in interest rates.

In accordance with CECL, our HTM debt securities portfolio is evaluated quarterly to assess whether an ACL is required. We measure expected credit losses on HTM debt securities on a collective basis by major security type. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. At September 30, 2023 and December 31, 2022, calculated credit losses on HTM debt securities were de minimis due to the high credit quality of the portfolio, which included securities issued or guaranteed by U.S. Government agencies, GSEs, high credit quality municipalities and supranational entities. As a result, no ACL for HTM debt securities was recorded.

For AFS debt securities in an unrealized loss position, if we intend to sell, or if it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis, the security's amortized cost basis is written down to fair value through income. Absent circumstances when an AFS security would be sold, we evaluate whether the decline in fair value has resulted from credit losses or other factors. The evaluation considers factors such as the extent to which fair value is less than amortized cost, changes to the security’s rating, and adverse conditions specific to the security. If the evaluation indicates a credit loss exists, an ACL may be recorded, with such allowance limited to the amount by which fair value is below amortized cost. Any impairment unrelated to credit factors is recognized in OCI. At September 30, 2023 and December 31, 2022, there was no ACL related to the AFS debt securities portfolio. Unrealized losses at September 30, 2023 and December 31, 2022 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, 2023 and December 31, 2022, the net carrying amount of goodwill was $920 million and $751 million, respectively.

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

In connection with the acquisition of Progress in the first quarter of 2023, we recorded goodwill and a core deposit intangible of $146 million and $40.0 million, respectively. In connection with the acquisition of First Miami in the third quarter of 2023, we recorded goodwill and a core deposit intangible of $23.2 million and $18.0 million, respectively. See Note 4 to the financial statements for further information about these acquisitions. Also during the third quarter of 2023, United reduced its core deposit intangible related to the Reliant acquisition by $656,000 as a result of the sale of core deposits in connection with a whole branch disposal.

Deposits

Customer deposits are the primary source of funds for the continued growth of our earning assets. We believe our high level of service, as evidenced by our strong customer satisfaction scores, has been instrumental in attracting and retaining customer deposit accounts. The increase in deposits since December 31, 2022 was mostly driven by the deposits assumed in the Progress and First Miami transactions, although we also generated organic growth by increasing the rates offered on deposits to remain competitive in the market in the midst of the rising rate environment. As of September 30, 2023, we had approximately $8.79 billion of uninsured deposits, of which $2.28 billion was collateralized by investment securities.


Table 15 - Deposits
(in thousands)


	September 30, 2023		December 31, 2022
Noninterest-bearing demand	$	6,782,031	$	7,643,081
NOW and interest-bearing demand	5,349,335		4,350,878
Money market and savings	6,957,028		5,967,017
Time	3,554,619		1,781,482
Total customer deposits	22,643,013		19,742,458
Brokered deposits	214,855		134,049
Total deposits	$	22,857,868	$	19,876,507

Borrowing Activities

At both September 30, 2023 and December 31, 2022, we had long-term debt outstanding of $325 million, which includes senior debentures, subordinated debentures, and trust preferred securities. Also at December 31, 2022, we had short-term borrowings outstanding of $159 million, which was mostly comprised of repurchase agreements, and we had $550 million of FHLB advances outstanding. At September 30, 2023, there were $37.3 million in short-term borrowings outstanding, which represents repurchase agreements obtained in connection with the First Miami transaction. There were no FHLB advances outstanding at September 30, 2023. The need to utilize short-term funding sources since December 31, 2022 has decreased as a result of the sale of investment securities noted above and growth in customer and brokered deposits, which allowed us to fund loan growth and repay short-term borrowings.

Contractual Obligations

There have not been any material changes to our contractual obligations since December 31, 2022.

Off-Balance Sheet Arrangements

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

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

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

All of these instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet. The total amount of these instruments does not necessarily represent future cash requirements because a significant portion of these instruments expire without being used. We are not involved in off-balance sheet contractual relationships, other than those disclosed in this Report, that could result in liquidity needs or other commitments, or that could significantly affect earnings. See Note 23 to the consolidated financial statements included in our 2022 10-K and Note 15 to the consolidated financial statements in this Report for additional information on off-balance sheet arrangements.

Interest Rate Sensitivity Management

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

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

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

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


Table 16 - Interest Sensitivity
(in thousands)


	Increase (Decrease) in Net Interest Revenue from Base Scenario at
	September 30, 2023				December 31, 2022
Change in Rates	Shock		Ramp		Shock		Ramp
200 basis point increase	0.42	%	(1.09)	%	6.97	%	4.33	%
100 basis point increase	0.26		(0.62)		3.53		2.85
100 basis point decrease	(1.11)		(0.15)		(3.78)		(3.12)
200 basis point decrease	(3.65)		(0.32)		(8.39)		(5.07)

The current environment is marked by the most rapid rate increases in decades, which, in part, has made non-bank products, such as U.S. Treasuries and money market funds, more attractive to our deposit customers. For this and other reasons, the banking industry’s deposit base has been shrinking since the first half of 2022. This industry-wide outflow of deposits has increased price competition for bank deposits. As such, industry deposit betas, including ours, have been increasing at a faster pace relative to the last rising rate cycle. Deposit beta is a measure of the change in a bank’s average rate paid on deposits to the change in the federal funds rate. Our cumulative total deposit beta for the current rising rate cycle increased to 37% in the third quarter of 2023, excluding First Miami. Our cumulative total deposit beta in the last upward rate cycle from November 2015 to July 2019 was 22%.

Our interest sensitivity model includes significant key assumptions which may change over time. Although our model generally assumes no change in deposit portfolio size or composition, we have included an assumption for the runoff of surge deposits since 2021. In the second quarter of 2023, in response to the rapid rate increases mentioned above, we increased the beta assumption in our model. As of September 30, 2023, the modeled total deposit beta, which is measured as the change in our overall deposit rate as a percentage of the change in the targeted Federal Funds rate, was 39%. A higher total deposit beta assumption generally indicates a less asset sensitive balance sheet and lowers the expected increase in net interest revenue in the increasing rate scenarios.

Liquidity Management

Liquidity is defined as the ability to convert assets into cash or cash equivalents without significant loss and to raise additional funds by increasing liabilities. Liquidity management involves maintaining the ability to meet the daily cash flow requirements of customers, both depositors and borrowers. The primary objective is to ensure that sufficient funding is available, at a reasonable cost, to meet ongoing operational cash needs and to take advantage of revenue producing opportunities as they arise. While the desired level of liquidity will vary depending upon a variety of factors, our primary goal is to maintain a sufficient level of liquidity in all expected economic environments. To assist in determining the adequacy of our liquidity, we perform a variety of liquidity stress tests. We maintain an unencumbered liquid asset reserve to help ensure our ability to meet our obligations under normal conditions for at least a 12-month period and under severely adverse liquidity conditions for a minimum of 30 days.

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

The Bank’s main source of liquidity is customer interest-bearing and noninterest-bearing deposit accounts. Liquidity is also available from wholesale funding sources consisting primarily of repurchase agreements, Federal funds purchased, FHLB advances, and brokered deposits. These sources of liquidity are generally short-term in nature and are used as necessary to fund asset growth and meet other short-term liquidity needs. In response to recent bank failures, we have focused on maximizing the amount of securities and loans available as collateral for contingent liquidity sources as well as reevaluated the assumptions in our liquidity stress test, particularly as it relates to deposit duration.

At September 30, 2023, we had sufficient qualifying collateral to provide borrowing capacity for FHLB advances of $1.88 billion, Federal Reserve discount window borrowing capacity of $2.73 billion and Federal Reserve Bank Term Funding Program capacity of $2.03 billion. We also had unpledged investment securities of $1.53 billion that could be used as collateral for additional borrowings. In addition, we believe we have the ability to attract retail deposits by competing more aggressively on pricing.

In addition, because the Holding Company is a separate entity and apart from the Bank, it must provide for its own liquidity. The Holding Company is responsible for the payment of dividends declared for its common and preferred shareholders, and interest and principal on any outstanding debt or trust preferred securities. The Holding Company currently has internal capital resources to meet these obligations. While the Holding Company has access to the capital markets, 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.

Significant uses and sources of cash during the nine months ended September 30, 2023 are as follows. See the consolidated statement of cash flows for further detail.

•Net cash provided by operating activities of $272 million reflects net income of $173 million adjusted for non-cash transactions, partly offset by changes in loans held for sale and other assets. Significant non-cash transactions for the period included a $74.8 million provision for credit losses and net depreciation, amortization, and accretion of $34.0 million.

•Net cash used in investing activities of $2.37 million primarily consisted of a net increase in loans of $875 million, purchases of AFS securities and outflows for equity investments totaling $429 million and net cash paid to dispose of two of our Tennessee branches of $93.6 million. These uses of cash were partially offset by proceeds from securities sales, maturities and calls of $1.12 billion, net cash received in the acquisitions of First Miami and Progress of $208 million and equity investment inflows of $124 million.

•Net cash used in financing activities of $157 million was driven by a net increase in deposits of $886 million, partially offset by net repayments of FHLB advances of $645 million, a net decrease in short-term borrowings of $310 million, and dividends on common and preferred stock of $82.4 million.

In the opinion of management, our liquidity position at September 30, 2023 was sufficient to meet our expected cash flow requirements for the foreseeable future.

Capital Resources and Dividends

Shareholders’ equity at September 30, 2023 was $3.18 billion, an increase of $483 million from December 31, 2022 primarily due to equity issued in the Progress and First Miami acquisitions and year-to-date earnings, partially offset by dividends declared on common and preferred stock.

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


Table 17 - Capital Ratios


							United Community Banks, Inc. (Consolidated)				United Community Bank
	Minimum		Well- Capitalized		Minimum Capital Plus Capital Conservation Buffer		September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Risk-based ratios:
CET1 capital	4.5	%	6.5	%	7.0	%	12.15	%	12.26	%	12.26	%	12.83	%
Tier 1 capital	6.0		8.0		8.5		12.60		12.81		12.26		12.83
Total capital	8.0		10.0		10.5		14.45		14.79		13.25		13.70
Leverage ratio	4.0		5.0		N/A		9.70		9.69		9.43		9.69

Effect of Inflation and Changing Prices

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

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

Item 3. Quantitative and Qualitative Disclosure About Market Risk

There have been no material changes in our market risk as of September 30, 2023 from that presented in our 2022 10-K. Our interest rate sensitivity position at September 30, 2023 is set forth in Table 16 in MD&A of this Report and incorporated herein by this reference.

Item 4. Controls and Procedures

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

(b) Changes in Internal Control Over Financial Reporting. No change in our internal control over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)) occurred during the fiscal quarter ended September 30, 2023 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 First Miami acquisition, which are set forth on pages 22 through 23 of the prospectus filed with the SEC on April 24, 2023 pursuant to Securities Act Rule 424(b)(3) (and incorporated herein by this reference), there have been no material changes to the risk factors previously disclosed in the 2022 10-K.

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

Issuer Purchases of Equity Securities

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


Preferred Stock Depositary Share Repurchases
(Dollars in thousands, except for per share amounts)	Total Number of Depositary Shares Purchased	Average Price Paid per Depositary Share		Total Number of Depositary Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)






July 1, 2023 - July 31, 2023	59,549	$	20.89	59,549	$	23,534
August 1, 2023 - August 31, 2023	150,139	20.62		150,139	20,438
September 1, 2023 - September 30, 2023	34,324	21.84		34,324	19,688
Total	244,012	$	20.86	244,012

(1) In May 2023, United’s Board authorized a preferred stock repurchase program to permit the repurchase of up to $25 million of its preferred stock. The program is scheduled to expire on the earlier of the repurchase of our preferred stock having an aggregate purchase price of $25 million or December 31, 2023. Under the program, shares may be repurchased in open market transactions or in privately negotiated transactions, from time to time, subject to market conditions, including transactions outside the safe harbor provided by Exchange Act Rule 10b-18 (but nevertheless adhering to Rule 10-b-18’s requirements). The preferred stock repurchase program may be modified, suspended or discontinued at any time at the Company’s discretion without prior notice, and does not commit the Company to repurchase shares of its preferred stock or depositary shares. The actual number and value of the shares to be purchased will be determined by the Company at its discretion, and will depend on a number of factors including the performance of the price of the depositary shares, market conditions, the availability of alternative investment opportunities and other factors the Company deems appropriate.

Item 6. Exhibits

(d) Exhibits. See Exhibit Index below.


EXHIBIT INDEX

Exhibit No.						Description

2.1						Agreement and Plan of Merger by and between United Community Banks, Inc. and First Miami Bancorp, Inc. dated as of February 13, 2023 (incorporated herein by reference from Exhibit 2.1 to the Current Report on Form 8-K of United Community Banks, Inc. filed with the SEC on February 15, 2023).

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).



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, 2023, formatted in Inline XBRL: (i) the Consolidated Balance Sheets (unaudited); (ii) the Consolidated Statements of Income (unaudited); (iii) the Consolidated Statements of Comprehensive Income (unaudited); (iv) the Consolidated Statements of Changes in Shareholders’ Equity (unaudited); (v) the Consolidated Statements of Cash Flows (unaudited); and (vi) the Notes to Consolidated Financial Statements (unaudited).













104						The cover page from United Community Bank’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 (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 3, 2023