Filed by Bowne Pure Compliance
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
     
þ   ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2007
or
     
o   TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ___________________
Commission file number 000-21656
A. Full title of the Plan and address of the Plan, if different
from that of the issuer named below:
United Community Banks, Inc.
Profit Sharing Plan
B. Name of the issuer of the securities held pursuant to the plan and
the address of the principal executive office:
United Community Banks, Inc.
63 Highways 515, PO Box 398
Blairsville, GA 30512
 
 

 

 

 

UNITED COMMUNITY BANKS, INC.
PROFIT SHARING PLAN
Financial Statements and Supplemental Schedule
December 31, 2007 and 2006
(with Report of Independent Registered Public Accounting Firm)

 

 

 

UNITED COMMUNITY BANKS, INC. PROFIT SHARING PLAN
Statements of Net Assets Available for Plan Benefits
December 31, 2007 and 2006
                 
    2007     2006  
Assets:
                
Cash
   $ 351,281     $ 732,123  
Investments at fair value:
                
Common stock of United Community Banks, Inc.
     22,363,557       42,412,566  
Shares of registered investment company mutual funds
     50,581,791       43,520,475  
 
            
Total investments
     72,945,348       85,933,041  
 
            
 
                
Receivables:
                
Employer’s contributions
     —       2,075,236  
Accrued dividends
     270,357       94,820  
Due from brokers
     104,390       199,003  
 
            
Total receivables
     374,747       2,369,059  
 
            
Total assets
     73,671,376       89,034,223  
 
            
 
                
Liabilities:
                
Amounts due to brokers
     300,752       283,456  
 
            
Total liabilities
     300,752       283,456  
 
            
Net assets available for plan benefits
   $ 73,370,624     $ 88,750,767  
 
            
See accompanying notes to financial statements.

 

2

 

UNITED COMMUNITY BANKS, INC. PROFIT SHARING PLAN
Statement of Changes in Net Assets Available for Plan Benefits
For the Year Ended December 31, 2007
         
Additions to net assets attributable to:
        
Investment income:
        
Interest and dividends
   $ 1,678,995  
 
      
Total investment income
     1,678,995  
 
      
 
        
Contributions:
        
Employer match
     3,100,492  
Employee deferrals
     5,551,687  
Employee rollovers and other
     302,892  
 
      
Total contributions
     8,955,071  
 
      
Total additions
     10,634,066  
 
      
 
        
Deductions from net assets attributable to:
        
Net depreciation in fair value of investments
     21,065,967  
Distributions paid to participants
     4,626,985  
Administrative expenses
     321,257  
 
      
Total deductions
     26,014,209  
 
      
 
        
Decrease in net assets available for plan benefits
     (15,380,143 )
Net assets available for plan benefits:
        
Beginning of year
     88,750,767  
 
      
End of year
   $ 73,370,624  
 
      
See accompanying notes to financial statements

 

3

 

UNITED COMMUNITY BANKS, INC. PROFIT SHARING PLAN
Notes to Financial Statements
(1)  
Description of the Plan
 
   
The following description of United Community Banks, Inc. Profit Sharing Plan (the “Plan”) provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan’s provisions.
 
   
General
 
   
The Plan is a defined contribution plan, and was formed to provide benefits exclusively for the employees of United Community Banks, Inc. and its subsidiaries (the “Company”). Employees are eligible to participate in the Plan on the next immediate enrollment date following employment, but are eligible to participate in the matching portion of the Plan after the completion of one year of service with the Company as defined in the Plan documents. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”).
 
   
Contributions
 
   
Employees of the Company participating in the Plan are entitled to make pre-tax contributions to the Plan in amounts from 2% to 75% of their annual base salary and commissions. The Company’s matching contribution is up to 5% of a participant’s annual base salary and commissions for those who have completed at least one year of service and have elected to make deferred contributions. The Company may also make an additional discretionary contribution in any Plan year. Contributions are subject to certain limitations.
 
   
Vesting
 
   
Participants are immediately vested in their contributions to the Plan. Participants vest in the Company’s contributions according to the following schedule:
             
Years of Service   Percentage  
Less Than
   1     0 %
 
   2     33 %
 
   3     66 %
More Than
   3     100 %
Participants automatically become 100% vested upon death or disability while still an active employee of the Company. Upon termination of employment, amounts not vested will be forfeited with such forfeitures reducing administrative expenses paid from the Plan.
Payment of Benefits
Upon retirement, a participant is entitled to receive 100% of his vested account balance in a lump-sum distribution or periodic payments over a predetermined period. Upon the death of a participant, the designated beneficiary is entitled to receive 100% of the participant’s account in a lump-sum distribution or periodic payments over a predetermined period. In addition, disabled participants are entitled to 100% of their account balance. Plan participants who are terminated for reasons other than retirement, death or disability are entitled to receive only the vested portion of their account. The Plan also allows for certain hardship withdrawals prior to termination of employment.
Administrative Expenses
The Plan pays substantially all administrative expenses.
Forfeited Accounts
At December 31, 2007 and 2006, forfeited non vested accounts approximated $19,000 and $24,000, respectively. These amounts will be used to reduce future administrative expenses.

 

4

 

UNITED COMMUNITY BANKS, INC. PROFIT SHARING PLAN
Notes to Financial Statements, continued
(1)  
Description of the Plan, continued
 
   
Plan Termination
 
   
Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. The participants affected by the termination or discontinuance of contributions will immediately become 100% vested in their accounts.
 
(2)  
Summary of Significant Accounting Policies
 
   
Basis of Accounting
 
   
The accompanying financial statements have been prepared on the accrual basis of accounting and present the net assets available for benefits and changes in those assets of the Plan. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of net assets available for plan benefits and changes therein, and disclosure of contingent assets and liabilities. Accordingly, actual results may differ from those estimates.
 
   
Investment Valuation
 
   
The Plan’s investments are stated at fair value. The Company’s stock trades on the Nasdaq Global Select Market, and the value of the Company’s stock is based on a quoted market price. Investments in mutual funds are valued at fair value based on quoted market prices of the underlying fund securities. The Plan holds investments at December 31, 2007 and 2006 in the Plan sponsor common stock amounting to $22,363,557 and $42,412,566, respectively. This investment represents 31% and 49% of total investments at December 31, 2007 and 2006, respectively. A significant decline in the market value of the Plan Sponsor’s common stock would significantly affect the net assets available for benefits.
 
   
The Plan provides for investments in various investment securities, which are exposed to various risks such as interest rate, credit and overall market volatility risks. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such change could materially affect the amounts reported in the statements of net assets available for plan benefits.
 
   
The net gain or loss from investment activity includes realized and unrealized gains and losses from investment activity as well as earnings on investments. Unrealized gains and losses are calculated as the difference between the current value of securities as of the end of the plan year and either the current value at the end of the preceding year or the actual cost if such investments were purchased during the current year. Realized gains or losses on sales of investments are calculated as the difference between sales proceeds and the current value of investments at the beginning of the year or the actual cost if such investments were purchased during the year. Earnings on investments include interest and dividends received on the Company’s common stock and mutual fund shares.
 
   
Securities transactions are recorded on the trade date. Dividend income is recorded on the ex-dividend date.

 

5

 

UNITED COMMUNITY BANKS, INC. PROFIT SHARING PLAN
Notes to Financial Statements, continued
(3)  
Investments
 
   
The following table represents investments at December 31, 2007 and 2006.
                 
    2007     2006  
 
                
Cash
   $ 351,281     $ 732,123  
 
            
 
                
United Community Banks, Inc. common stock (1,415,415 and 1,312,270 shares at December 31, 2007 and 2006, respectively)
   $ 22,363,557     $ 42,412,566  
 
            
 
                
Mutual funds:
                
American Beacon Select Money Market
   $ 2,773,699     $ 1,984,709  
NestEgg Dow Jones U.S. 2040 Fund
     6,791,180       6,258,532  
NestEgg Dow Jones U.S. 2030 Fund
     6,672,700       5,819,391  
NestEgg Dow Jones U.S. 2020 Fund
     11,890,582       10,584,538  
NestEgg Dow Jones U.S. 2010 Fund
     2,513,924       2,393,498  
NestEgg Dow Jones U.S. 2015 Fund
     3,481,634       3,890,881  
American Independence International Equity Fund
     2,460,171       1,424,381  
Federated Max-Cap Fund
     —       1,466,060  
Franklin Strategic Small MIDCAP Growth Fund
     —       1,274,089  
Vanguard Windsor II Fund
     2,222,281       1,782,859  
Vanguard Explorer Fund
     1,245,134       1,002,345  
Vanguard 500 Index Fund
     1,570,577       —  
Royce Low Priced Stock Fund
     —       1,089,045  
Goldman Sachs Mid Cap Value Fund
     1,777,155       1,234,081  
Morgan Stanley Mid Cap Growth Fund
     2,150,080       —  
Northern Small Cap Value Fund
     957,700       —  
T Rowe Price Growth Fund
     1,738,756       1,161,962  
PIMCO Total Return Bond Fund
     2,336,218       2,154,104  
 
            
Total mutual funds
   $ 50,581,791     $ 43,520,475  
 
            
During 2007, the Plan’s investments (including investments bought, sold, and held during the year) depreciated in value by $21,132,492 as detailed below:
         
    Year Ended  
    December 31, 2007  
 
        
Net change in investments at fair value as determined by quoted market price:
        
Mutual funds
   $ 1,694,637  
United Community Banks, Inc. common stock
     (22,827,129 )
 
      
Net change in fair value
   $ (21,132,492 )
 
      

 

6

 

UNITED COMMUNITY BANKS, INC. PROFIT SHARING PLAN
Notes to Financial Statements, continued
(3)  
Investments, continued
 
   
Single investments representing more than 5% of the Plan’s net assets as of December 31, 2007 and/or 2006, are separately identified.
                 
    December 31  
    2007     2006  
 
                
United Community Banks, Inc. common stock
   $ 22,363,557     $ 42,412,566  
NestEgg Dow Jones U.S. 2040 Fund
     6,791,180       6,258,532  
NestEgg Dow Jones U.S. 2030 Fund
     6,672,700       5,819,391  
NestEgg Dow Jones U.S. 2020 Fund
     11,890,582       10,584,538  
(4)  
Tax Status
 
   
The Plan obtained its latest determination letter on October 4, 2002, in which the Internal Revenue Service stated that the Plan, as then designed, was in compliance with the applicable requirements of the Internal Revenue Code (“IRC”). The Plan was amended effective December 21, 2006; however, the Plan sponsor and the Plan’s tax counsel believe the Plan is currently designed and being operated in compliance with the applicable requirements of the IRC. Therefore, no provision for income taxes has been included in the Plan’s financial statements.
 
(5)  
Party-In-Interest Transactions
 
   
During the course of the year, the Plan enters into certain party-in-interest transactions with the Company and INTRUST Bank, N.A. (the “Trustee”). The Company, as the plan sponsor, declares cash dividends on its common stock on a quarterly basis throughout the year. In 2007, the Plan received cash dividends of approximately $468,889 on its investment in the Company’s stock. Additionally, the Company provides a discretionary contribution to the Plan’s participants, which is based on the diluted earnings per share of the Company. The contribution receivable was $2,075,236 as of December 31, 2006. No discretionary contribution was made for the 2007 plan year, and therefore there was no contribution receivable as of December 31, 2007.
 
   
The Plan regularly purchases shares of the Company’s common stock directly from the Company based on the average of the high and low price for United Community Banks, Inc. common stock as reported by Nasdaq on the date of transaction. During 2007 and 2006, the Plan purchased 71,577 and 111,485 shares, respectively, directly from the Company.
 
   
The Trustee functions as the trustee, custodian and record keeper for the Plan. The cost for these services totaled $321,257 for 2007 and is presented on the statement of changes in net assets available for plan benefits as administrative expenses. The fees for 2007 for trustee and custodial services amounted to $273,592 and for record keeping amounted to $47,665.
 
(6)  
Acquisition
 
   
On June 1, 2007, the Company acquired Gwinnett Commercial Group, Inc. and its wholly owned subsidiary, First Bank of the South. Contributions to Gwinnett Commercial Group, Inc.’s defined contribution plan ceased at the acquisition date. Gwinnett Commercial Group, Inc.’s defined contribution plan is in the process of being merged into the Plan, pending approval from the Department of Labor. No assets or transactions of the Gwinnett Commercial Group, Inc. plan are included in these financial statements.

 

7

 

UNITED COMMUNITY BANKS, INC. PROFIT SHARING PLAN
Schedule of Assets Held for Investment Purposes
December 31, 2007
Employer Identification Number: 58-0554454
Plan Number: 001
                     
    Identity of issuer           Fair  
 (a)    or similar party (b)   Description of assets (c)   Cost (d)   Value (e)  
 
                    
 * 
   United Community Banks, Inc.   Common stock -- 1,415,415 shares   N/A   $ 22,363,557  
 
   American Beacon   Select Funds Money Market -- 2,773,699 shares   N/A     2,773,699  
 * 
   INTRUST Bank, N.A.   NestEgg Dow Jones U.S. 2040 Fund -- 659,338 shares   N/A     6,791,180  
 * 
   INTRUST Bank, N.A.   NestEgg Dow Jones U.S. 2030 Fund -- 659,358 shares   N/A     6,672,700  
 * 
   INTRUST Bank, N.A.   NestEgg Dow Jones U.S. 2020 Fund -- 1,114,394 shares   N/A     11,890,582  
 * 
   INTRUST Bank, N.A.   NestEgg Dow Jones U.S. 2010 Fund -- 249,645 shares   N/A     2,513,924  
 * 
   INTRUST Bank, N.A.   NestEgg Dow Jones U.S 2015 Fund -- 345,743 shares   N/A     3,481,634  
 * 
   INTRUST Bank, N.A.   America Independence International Equity Fund -- 167,018 shares   N/A     2,460,171  
 
   Vanguard Funds   Vanguard Explorer Fund -- 17,490 shares   N/A     1,245,134  
 
   Vanguard Funds   Vanguard Windsor II Fund -- 71,090 shares   N/A     2,222,281  
 
   Vanguard Funds   Vanguard 500 Index Fund -- 14,068 shares   N/A     1,570,577  
 
   PIMCO Funds   PIMCO Total Return Bond Fund -- 218,542 shares   N/A     2,336,218  
 
   Goldman Sachs   Goldman Sachs Mid Cap Value Fund -- 49,864 shares   N/A     1,777,155  
 
   T Rowe Price   T Rowe Price Growth Stock Fund -- 51,656 shares   N/A     1,738,756  
 
   Morgan Stanley   Morgan Stanley Mid Cap Growth Fund -- 64,509 shares   N/A     2,150,080  
 
   Northern Trust Investments   Northern Small Cap Value Fund -- 68,949 shares   N/A     957,700  

 

8

 

SIGNATURE
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
United Community Banks, Inc.
Profit Sharing Plan
By: /s/ John Goff
Title: Vice President and Trust Officer INTRUST BANK, N.A.
Date: June 20, 2008

 

9

 

EXHIBIT INDEX
     
Exhibit No.   Description
 
    
23
  Consent of Independent Registered Public Accounting Firm

 

10