UNITED COMMUNITY BANKS, INC.
 

 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 2005
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 0-21656
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, 2005 and 2004
(with Independent Registered Public Accountants’ Report thereon)
Certified Public Accountants
Suite 1800 235 Peachtree Street NE Atlanta, Georgia 30303 Phone 404-588-4200 Fax 404-588-4222 www.pkm.com

 


 

(PKM LOGO)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The Benefits Administrative Committee Members
United Community Banks, Inc. Profit Sharing Plan
Blairsville, Georgia
We have audited the accompanying statements of net assets available for plan benefits of United Community Banks, Inc. Profit Sharing Plan as of December 31, 2005 and 2004, and the related statement of changes in net assets available for plan benefits for the year ended December 31, 2005. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for plan benefits of United Community Banks, Inc. Profit Sharing Plan as of December 31, 2005 and 2004, and the changes in net assets available for plan benefits for the year ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.
Our audit of the Plan’s financial statements as of and for the year ended December 31, 2005, was performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental Schedule of Assets Held for Investment Purposes is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management and has been subjected to the auditing procedures applied in our audit of the basic financial statements for the year ended December 31, 2005, and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
PORTER KEADLE MOORE, LLP
Atlanta, Georgia
June 22, 2006
Certified Public Accountants
Suite 1800 235 Peachtree Street NE Atlanta, Georgia 30303 Phone 404-588-4200 Fax 404-588-4222 www.pkm.com

 


 

UNITED COMMUNITY BANKS, INC. PROFIT SHARING PLAN
Statements of Net Assets Available for Plan Benefits
December 31, 2005 and 2004
                 
    2005     2004  
Assets:
               
Cash
  $ 260,178       87,968  
Investments at fair value:
               
Common stock of United Community Banks, Inc.
    23,450,643       21,540,526  
Shares of registered investment company mutual funds
    35,489,158       31,041,191  
 
           
 
               
Total investments
    58,939,801       52,581,717  
 
           
 
               
Receivables:
               
Employees’ contributions
          141,439  
Employer’s contributions
    1,444,128       1,265,670  
Accrued dividends
    68,383       90,579  
Due from brokers
          6,716  
 
           
 
               
Total receivables
    1,512,511       1,504,404  
 
           
 
               
Total assets
    60,712,490       54,174,089  
 
           
 
               
Liabilities:
               
Amounts due to brokers
    3,831       4,264  
Benefit claims payable
    20,000       59,634  
 
           
 
               
Total liabilities
    23,831       63,898  
 
           
 
               
Net assets available for plan benefits
  $ 60,688,659       54,110,191  
 
           
See accompanying notes to financial statements.

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UNITED COMMUNITY BANKS, INC. PROFIT SHARING PLAN
Statement of Changes in Net Assets Available for Plan Benefits
For the Year Ended December 31, 2005
         
Additions to net assets attributable to:
       
Investment income:
       
Interest and dividends
  $ 1,294,074  
Net appreciation in fair value of investments
    282,708  
 
     
 
       
Total investment income
    1,576,782  
 
     
 
       
Contributions:
       
Employer match
    2,301,750  
Employer discretionary
    1,450,121  
Employee deferrals
    4,062,156  
Employee rollovers
    1,136,560  
Other
    707,813  
 
     
 
       
Total contributions
    9,658,400  
 
     
 
       
Total additions
    11,235,182  
 
     
 
       
Deductions from net assets attributable to:
       
Distributions paid to participants
    4,387,423  
Administrative expenses
    269,291  
 
     
 
       
Total deductions
    4,656,714  
 
     
 
       
Increase in net assets available for plan benefits
    6,578,468  
 
       
Net assets available for plan benefits:
       
 
       
Beginning of year
    54,110,191  
 
     
 
End of year
  $ 60,688,659  
 
     
See accompanying notes to financial statements

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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 compensation. The Company’s matching contribution is up to 5% of a participant’s annual compensation 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 voluntary 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. Forfeitures during 2005 approximated $18,000.
 
    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.

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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 stock market, and the value of UCBI 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, 2005 and 2004 in the Plan sponsor common stock amounting to $23,450,643 and $21,540,526 respectively. This investment represents 66% and 69% of total investments at December 31, 2005 and 2004, 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/ (loss) from investment activity includes realized and unrealized gains and losses from investment activity as well as earnings on investments. Unrealized gains/ (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.

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UNITED COMMUNITY BANKS, INC. PROFIT SHARING PLAN
Notes to Financial Statements, continued
(3)   Investments
 
    The following table represents investments at December 31, 2005 and 2004.
                 
    2005     2004  
Cash
  $ 260,178       87,968  
 
           
 
               
United Community Banks, Inc. common stock (879,478 and 800,116 shares at December 31, 2005 and 2004, respectively)
  $ 23,450,643       21,540,526  
 
           
 
               
INTRUST funds:
               
AI Money Market Fund
  $ 1,937,520       1,516,616  
Amcent Equity Income Fund
    795,174       510,747  
AI Nestegg 2040 Fund
    5,241,349       4,587,035  
AI Nestegg 2030 Fund
    4,889,710       4,369,335  
AI Nestegg 2020 Fund
    9,081,102       8,734,351  
AI Nestegg 2010 Fund
    3,299,451       3,301,064  
AI Nestegg Capital Preservation Fund (formerly Nestegg 2000 Fund)
    1,888,738       1,704,153  
American Independence International Multi-Manager Stock Fund
    762,401       368,809  
Federated Stock Trust Fund
          952,194  
Federated Max-Cap Fund
    1,108,714       915,884  
Franklin Strategic Small MIDCAP Growth Fund
    1,028,932       633,589  
Vanguard Windsor II Fund
    1,225,350        
Vanguard Explorer
    706,412       460,864  
Royce Fund
    718,678       485,772  
American Century Ultra
    909,070       761,404  
Pimco Total Return Bond Fund
    1,896,557       1,739,374  
 
           
Total INTRUST Funds
  $ 35,489,158       31,041,191  
 
           
    During 2005, the Plan’s investments (including investments bought, sold, and held during the year) appreciated in value by $282,708 as detailed below:
         
    Year Ended  
    December 31, 2005  
Net change in investments at fair value as determined by quoted market price
       
Mutual funds
  $ 453,491  
United Community Banks, Inc. common stock
    (170,783 )
 
     
     
Net change in fair value
  $ 282,708  
 
     
    Single investments representing more than 5% of the Plan’s net assets as of December 31, 2005 and 2004, are separately identified.
                 
    December 31
    2005   2004
United Community Banks, Inc. common stock
  $ 23,450,643       21,540,526  
AI Nestegg 2040 Fund
  $ 5,241,349       4,587,035  
AI Nestegg 2030 Fund
  $ 4,889,710       4,369,335  
AI Nestegg 2020 Fund
  $ 9,081,102       8,734,351  
AI Nestegg 2010 Fund
  $ 3,299,451       3,301,064  

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UNITED COMMUNITY BANKS, INC. PROFIT SHARING PLAN
Notes to Financial Statements, continued
(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 April 1, 2005; 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 2005, the Plan received cash dividends of approximately $224,000 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 $1,444,128 and $1,265,670 as of December 31, 2005, and 2004, respectively.
 
    The Trustee functions as the trustee, custodian and record keeper for the Plan. The cost for these services totaled $269,291 for 2005 and is presented on the statement of changes in net assets available for plan benefits as administrative expenses. The fees for 2005 for trustee and custodial services amounted to $220,806 and for record keeping $48,485.

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UNITED COMMUNITY BANKS, INC. PROFIT SHARING PLAN
Schedule of Assets Held for Investment Purposes
December 31, 2005
Employer Identification Number: 58-0554454
Plan Number: 001
                     
    Identity of issuer              
    or similar party           Fair  
(a)   (b)   Description of assets (c)   Cost (d)   Value (e)  
*
  United Community   Common stock – 879,478 shares   N/A   $ 23,450,643  
 
  Banks, Inc.                
     
*
  INTRUST BANK, N.A.   AI Money Market Fund – 1,937,520 shares   N/A     1,937,520  
  American Century Fund   AMCENT Equity Income Fund – 101,685 shares   N/A     795,174  
*
  INTRUST BANK, N.A.   AI NESTEGG 2040 Fund – 482,629 shares   N/A     5,241,349  
*
  INTRUST BANK, N.A.   AI NESTEGG 2030 Fund – 458,267 shares   N/A     4,889,710  
*
  INTRUST BANK, N.A.   AI NESTEGG 2020 Fund – 862,403 shares   N/A     9,081,102  
*
  INTRUST BANK, N.A.   AI NESTEGG 2010 Fund –317,255 shares   N/A     3,299,451  
*
  INTRUST BANK, N.A.   AI NESTEGG Capital Preservation Fund –   N/A     1,888,738  
 
      187,561 shares            
*
  INTRUST BANK, N.A.   AI International Multi-Manager Stock Fund –            
 
      53,956 shares   N/A     762,401  
  Vanguard Funds   Vanguard Explorer Fund – 9,405 shares   N/A     706,412  
  Vanguard Funds   Vanguard Windsor II Fund – 39,111 shares   N/A     1,225,350  
  Federated Funds   Federated Max-Cap Fund – 44,778 shares   N/A     1,108,714  
  Franklin Funds   Franklin Strategic Small MIDCAP Growth Fund            
 
      – 27,278 shares   N/A     1,028,932  
  Royce Funds   Royce Fund – 46,277 shares   N/A     718,678  
  American Century Funds   American Century Mutual Funds Inc Ultra Fund            
 
      Investor - 29,894 shares   N/A     909,070  
  PIMCO Funds   PIMCO Total Return Bond Fund – 180,625 shares   N/A     1,896,557  
 
*   Party- in- interest
    N/A — Due to Plan being fully participant directed, such values are not required.

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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 26, 2006    

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

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