UNITED COMMUNITY BANKS, INC.
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 11-K

[X] ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2003

or

[  ] 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 Highway 515, PO Box 398
Blairsville, GA 30512

 


 

UNITED COMMUNITY BANKS, INC.
PROFIT SHARING PLAN

Financial Statements and Supplemental Schedule

December 31, 2003 and 2002

(with Independent Accountants’ Report thereon)

 


 

(PORTER KEADLE MOORE LOGO)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Trustees
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, 2003 and 2002, and the related statement of changes in net assets available for plan benefits for the year ended December 31, 2003. 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 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, 2003 and 2002 and the changes in its net assets available for plan benefits for the year ended December 31, 2003, in conformity with the United States generally accepted accounting principles.

Our audit of the Plan’s financial statements as of and for the year ended December 31, 2003, 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, 2003, and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

(-s- Porter Keadle Moore Signature)

Atlanta, Georgia
July 12, 2004

 


 

UNITED COMMUNITY BANKS, INC. PROFIT SHARING PLAN

Statements of Net Assets Available for Plan Benefits

December 31, 2003 and 2002

                 
    2003
  2002
Assets:
               
Cash
  $ 4,999       166,801  
Investments at fair value:
               
Common stock of United Community Banks, Inc.
    16,438,649       11,973,298  
Shares of registered investment company mutual funds
    25,868,049       18,624,364  
 
   
 
     
 
 
Total investments
    42,311,697       30,764,463  
 
   
 
     
 
 
Receivables:
               
Employees’ contributions
    110,608        
Employer’s contributions
    1,125,053       833,419  
Accrued dividends
    43,040       30,676  
Participant loans
          216  
 
   
 
     
 
 
Total receivables
    1,278,701       864,311  
 
   
 
     
 
 
Total assets
    43,590,398       31,628,774  
 
   
 
     
 
 
Liabilities:
               
Amounts due to brokers
    4,706       11,502  
Benefit claims payable
    1,348        
 
   
 
     
 
 
Total liabilities
    6,054       11,502  
 
   
 
     
 
 
Net assets available for plan benefits
  $ 43,584,344       31,617,272  
 
   
 
     
 
 

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, 2003

         
Additions to net assets attributable to:
       
Investment income:
       
Interest and dividends
  $ 551,722  
Net appreciation in fair value of investments
    8,079,006  
 
   
 
 
  Total investment income
    8,630,728  
Contributions:
       
Employer discretionary
    1,055,619  
Employer match
    1,698,439  
Employee deferrals
    2,764,949  
Employee rollovers
    223,823  
Other
    21,946  
 
   
 
 
  Total contributions
    5,764,776  
 
   
 
 
  Total additions
    14,395,504  
 
   
 
 
Deductions from net assets attributable to:
       
Distributions paid to participants
    2,273,377  
Administrative expenses
    155,055  
 
   
 
 
  Total deductions
    2,428,432  
 
   
 
 
Net increase in net assets available for plan benefits
    11,967,072  
Net assets available for plan benefits:
       
Beginning of year
    31,617,272  
 
   
 
 
End of year
  $ 43,584,344  
 
   
 
 

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 after the completion of one year of service with the Company. 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 30% 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:
                 
            Vested
Years of Service
  Percentage
Less than
1           0 %  
 
2           33 %
 
3           66 %
3 or more
            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 2003 totaled $22,435.
 
    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
 
    In 2003, the Plan began paying administrative expenses. Prior to 2003, administrative expenses of the Plan were absorbed by the Company.

-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 exchange, and the value of UCBI stock at December 31, 2003 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 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 changes could materially affect the amounts reported in the statements of net assets available for 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.

-5-


 

UNITED COMMUNITY BANKS, INC. PROFIT SHARING PLAN

Notes to Financial Statements, continued

(3) Investments

    The following table represents investments at December 31, 2003 and 2002
                 
    2003
  2002
Cash
  $ 4,999       166,801  
 
   
 
     
 
 
United Community Banks, Inc. Common Stock (750,167 and 736,969 shares at December 31, 2003 and 2002, respectively)
  $ 16,438,649       11,973,298  
 
   
 
     
 
 
INTRUST Funds:
               
AI Money Market Fund
  $ 1,245,769       1,132,961  
Federated – U.S. Treasury Cash Reserves Fund
    885       884  
Amcent Equity Income Fund
    276,757        
AI Nestegg 2040 Fund
    3,969,356       2,525,558  
AI Nestegg 2030 Fund
    3,595,491       2,497,343  
AI Nestegg 2020 Fund
    7,664,069       6,051,818  
AI Nestegg 2010 Fund
    2,904,715       2,388,601  
AI Nestegg Capital Preservation Fund (formerly Nestegg 2000 Fund)
    1,691,169       1,249,708  
American Independence International Multi-Manager Stock Fund
    168,987       82,211  
Baron Growth Fund
    205,780       14,399  
Federated Stock Trust Fund
    936,234       555,749  
Federated Max-Cap Fund
    669,923       413,693  
Franklin Strategic Small MIDCAP Growth Fund
    477,764       229,169  
Janus Growth & Income Fund
    638,173       342,750  
MSIF MIDCAP Value Advisor Fund
          141,184  
Royce Fund
    142,336       12,030  
Pimco Total Return Bond Fund
    1,280,641       986,306  
 
   
 
     
 
 
Total INTRUST Funds
  $ 25,868,049       18,624,364  
 
   
 
     
 
 

    During 2003, the Plan’s investments (including investments bought, sold, and held during the year) appreciated in value by $8,079,006 as detailed below:
         
    Year Ended
    December 31, 2003
Net Change in Investments at Fair Value as Determined by Quoted Market Price
       
Mutual Funds
  $ 3,706,314  
United Community Banks, Inc. Common Stock
    4,372,692  
 
   
 
 
Net change in Fair Value
  $ 8,079,006  
 
   
 
 

Single investments representing more than 5% of the Plan’s net assets as of December 31, 2003 and 2002, are separately identified.

                 
    December 31
    2003
  2002
United Community Banks, Inc. Common Stock
    16,438,649       11,973,298  
AI Nestegg 2040 Fund
    3,969,356       2,525,558  
AI Nestegg 2030 Fund
    3,595,491       2,497,343  
AI Nestegg 2020 Fund
    7,664,069       6,051,818  
AI Nestegg 2010 Fund
    2,904,715       2,388,601  

-6-


 

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 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

The Plan received cash dividends of $543,105 on its investment in United Community Banks, Inc. common stock during 2003.

-7-


 

UNITED COMMUNITY BANKS, INC. PROFIT SHARING PLAN

Schedule of Assets Held for Investment Purposes

December 31, 2003

Employer Identification Number: 58-0554454

Plan Number: 001

                 
(a) Identity of issuer           Fair
   or similar party (b)
  Description of assets (c)
  Cost (d)
  Value (e)
* United Community
Banks, Inc.
  Common stock — 750,167 shares   N/A   $ 16,438,649  
INTRUST
INTRUST
  AI Money Market Fund — 1,245,769 shares
Federated — U.S. Treasury Cash Reserves Fund - 885 shares
  N/A
N/A
    1,245,769
885
 
INTRUST
  AMCENT Equity Income Fund — 35,527 shares   N/A     276,757  
INTRUST
  AI NESTEGG 2040 Fund — 422,722 shares   N/A     3,969,356  
INTRUST
  AI NESTEGG 2030 Fund — 376,097 shares   N/A     3,595,491  
INTRUST
  AI NESTEGG 2020 Fund — 793,382 shares   N/A     7,664,069  
INTRUST
  AI NESTEGG 2010 Fund — 288,739 shares   N/A     2,904,715  
INTRUST
  AI NESTEGG Capital Preservation Fund -
163,398 shares
AI International Multi-Manager Stock Fund -
  N/A     1,691,169  
INTRUST
  14,759 shares   N/A     168,987  
INTRUST
  Baron Growth Fund — 5,806 shares   N/A     205,780  
INTRUST
  Federated Stock Trust Fund — 27,319 shares   N/A     936,234  
INTRUST
  Federated Max-Cap Fund — 29,761 shares   N/A     669,923  
  Franklin Strategic Small MIDCAP Growth Fund            
INTRUST
  - 15,810 shares   N/A     477,764  
INTRUST
  Janus Growth & Income — 22,074 shares   N/A     638,173  
INTRUST
  Royce Fund — 10, 181 shares   N/A     142,336  
INTRUST
  PIMCO Total Return Bond Fund — 119,574 shares   N/A     1,280,641  

*   Party in interest

N/A — Due to Plan being fully participant directed, such values are not applicable.

-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:   July 22, 2004

       

-9-


 

EXHIBIT INDEX

     
Exhibit No.
  Description
23
  Consent of Independent Registered Public Accountants
 
   

-10-