UNITED COMMUNITY BANKS INCUCB
UNITED COMMUNITY BANKS INC Fair Value Disclosure
Fair Value Measurements
Fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, United uses a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). United has processes in place to review the significant valuation inputs and to reassess how the instruments are classified in the valuation framework.
Fair Value Hierarchy
Level 1 Valuation is based upon quoted prices (unadjusted) in active markets for identical assets or liabilities that United has the ability to access.
Level 2 Valuation is based upon quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals.
Level 3 Valuation is generated from model-based techniques that use at least one significant assumption based on unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity.
In instances where 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. United’s 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 NYSE, 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 mortgage-backed securities issued by government sponsored entities, municipal bonds, corporate debt securities and asset-backed 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.
Mutual Funds and Deferred Compensation Plan Liabilities
Included in other assets in the consolidated balance sheets are mutual funds and other investments used to hedge the valuation risk of unfunded employee deferred compensation plans. The mutual funds and other investments are purchased to match deferred compensation plan participants’ investment elections and are valued at the daily closing price as reported by the fund. The mutual funds are open-end funds that publish their daily net asset value (“NAV”) and transact at that price and are thus classified as Level 1. Other investments in this category are classified as Level 2.
Deferred compensation liabilities, also classified as Level 1 or Level 2 depending on the related investment, are carried at the fair value of the obligation to the employee and are included in other liabilities in the consolidated balance sheet.
Mortgage Loans Held for Sale
United has elected the fair value option for 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.
Derivative Financial Instruments
United uses derivatives to manage interest rate risk. The valuation of these instruments is typically determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts and the discounted expected variable cash payments. The variable cash payments are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. United also uses best effort and mandatory delivery forward loan sale commitments to hedge risk in its mortgage lending business.
United incorporates CVAs as necessary to appropriately reflect the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, United has considered the effect of netting and any applicable credit enhancements, such as collateral postings, thresholds and guarantees.
Management has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy. However, the CVAs associated with these derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by itself and its counterparties. Generally, management’s assessment of the significance of the CVAs has indicated that they are not a significant input to the overall valuation of the derivatives. In cases where management’s assessment indicates that the CVA is a significant input, the related derivative is disclosed as a Level 3 value. In other cases, derivatives are categorized as Level 3 when there is not an observable forward-rate curve available for the duration of the contract.
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.
Contingent Consideration Receivable
As part of the FinTrust sale in 2024, United recognized a receivable for contingent consideration. The contingent consideration receivable is measured at fair value using a probability-weighted discounted cash flow approach which includes significant unobservable inputs classified within Level 3 of the fair value hierarchy.
Servicing Rights for Residential Mortgage and SBA/USDA Loans
United recognizes servicing rights upon the sale of residential mortgage and SBA/USDA loans sold with servicing retained. Management has elected to carry these assets at fair value. Given the nature of the assets, the key valuation inputs, such as prepayment speeds and discount rates, are unobservable and management considers these Level 3 assets. For disclosure regarding the fair value of servicing rights, see Note 10.
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, aggregated by the level in the fair value hierarchy within which those measurements fall:
(in thousands) | ||||||||||||||||||||||||||
| December 31, 2025 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| AFS debt securities: | ||||||||||||||||||||||||||
| U.S. Treasuries | $ | 493,755 | $ | — | $ | — | $ | 493,755 | ||||||||||||||||||
| U.S. Government agencies & GSEs | — | 298,350 | — | 298,350 | ||||||||||||||||||||||
| State and political subdivisions | — | 154,883 | — | 154,883 | ||||||||||||||||||||||
| Residential MBS | — | 1,690,332 | — | 1,690,332 | ||||||||||||||||||||||
| Commercial MBS | — | 692,087 | — | 692,087 | ||||||||||||||||||||||
| Corporate bonds | — | 136,176 | 492 | 136,668 | ||||||||||||||||||||||
| Asset-backed securities | — | 284,788 | — | 284,788 | ||||||||||||||||||||||
| Equity securities with readily determinable fair values | — | 2,481 | — | 2,481 | ||||||||||||||||||||||
| Mortgage loans held for sale | — | 39,381 | — | 39,381 | ||||||||||||||||||||||
Mutual funds and other investments | 16,343 | 140 | — | 16,483 | ||||||||||||||||||||||
| Servicing rights for SBA/USDA loans | — | — | 4,880 | 4,880 | ||||||||||||||||||||||
| Residential mortgage servicing rights | — | — | 41,231 | 41,231 | ||||||||||||||||||||||
Contingent consideration receivable | — | — | 7,195 | 7,195 | ||||||||||||||||||||||
| Derivative financial instruments | — | 27,231 | 8,082 | 35,313 | ||||||||||||||||||||||
| Total assets | $ | 510,098 | $ | 3,325,849 | $ | 61,880 | $ | 3,897,827 | ||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||
| Deferred compensation plan liability | $ | 16,345 | $ | 140 | $ | — | $ | 16,485 | ||||||||||||||||||
| Derivative financial instruments | — | 44,507 | 8,490 | 52,997 | ||||||||||||||||||||||
| Total liabilities | $ | 16,345 | $ | 44,647 | $ | 8,490 | $ | 69,482 | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||
| December 31, 2024 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| AFS debt securities: | ||||||||||||||||||||||||||
| U.S. Treasuries | $ | 503,669 | $ | — | $ | — | $ | 503,669 | ||||||||||||||||||
| U.S. Government agencies & GSEs | — | 320,267 | — | 320,267 | ||||||||||||||||||||||
| State and political subdivisions | — | 158,232 | — | 158,232 | ||||||||||||||||||||||
| Residential MBS | — | 2,229,959 | — | 2,229,959 | ||||||||||||||||||||||
| Commercial MBS | — | 822,897 | — | 822,897 | ||||||||||||||||||||||
| Corporate bonds | — | 150,394 | 2,226 | 152,620 | ||||||||||||||||||||||
| Asset-backed securities | — | 248,647 | — | 248,647 | ||||||||||||||||||||||
| Equity securities with readily determinable fair values | — | 2,341 | — | 2,341 | ||||||||||||||||||||||
| Mortgage loans held for sale | — | 57,534 | — | 57,534 | ||||||||||||||||||||||
Mutual funds | 15,335 | — | — | 15,335 | ||||||||||||||||||||||
| Servicing rights for SBA/USDA loans | — | — | 4,697 | 4,697 | ||||||||||||||||||||||
| Residential mortgage servicing rights | — | — | 39,294 | 39,294 | ||||||||||||||||||||||
| Contingent consideration receivable | — | — | 7,470 | 7,470 | ||||||||||||||||||||||
| Derivative financial instruments | — | 35,227 | 11,656 | 46,883 | ||||||||||||||||||||||
| Total assets | $ | 519,004 | $ | 4,025,498 | $ | 65,343 | $ | 4,609,845 | ||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||
| Deferred compensation plan liability | $ | 15,331 | $ | — | $ | — | $ | 15,331 | ||||||||||||||||||
| Derivative financial instruments | — | 65,548 | 12,286 | 77,834 | ||||||||||||||||||||||
| Total liabilities | $ | 15,331 | $ | 65,548 | $ | 12,286 | $ | 93,165 | ||||||||||||||||||
For disclosure regarding the fair value of servicing rights, see Note 10. The following table shows a reconciliation of the beginning and ending balances for all other assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs that are classified as Level 3 values:
(in thousands) | Derivative Asset | Derivative Liability | Corporate Bonds | Contingent consideration receivable | |||||||||||||||||||||||||
| December 31, 2022 | $ | 11,513 | $ | 12,840 | $ | 2,212 | $ | — | |||||||||||||||||||||
| Additions | — | 241 | — | — | |||||||||||||||||||||||||
| Sales and settlements | (11) | — | — | — | |||||||||||||||||||||||||
| Fair value adjustments included in OCI | — | — | (7) | — | |||||||||||||||||||||||||
| Fair value adjustments included in earnings | (860) | (1,909) | — | — | |||||||||||||||||||||||||
| December 31, 2023 | 10,642 | 11,172 | 2,205 | — | |||||||||||||||||||||||||
Transfers from Level 3 (1) | — | (16) | — | ||||||||||||||||||||||||||
Transfers from Level 2 (1) | 484 | 925 | — | — | |||||||||||||||||||||||||
| Additions | 4,819 | 58 | — | 7,623 | |||||||||||||||||||||||||
| Sales and settlements | (5,834) | (393) | — | (153) | |||||||||||||||||||||||||
| Fair value adjustments included in OCI | — | — | 21 | — | |||||||||||||||||||||||||
| Fair value adjustments included in earnings | 1,545 | 540 | — | — | |||||||||||||||||||||||||
| December 31, 2024 | 11,656 | 12,286 | 2,226 | 7,470 | |||||||||||||||||||||||||
| Additions | 5,423 | 321 | — | — | |||||||||||||||||||||||||
| Sales and settlements | (5,219) | — | (1,750) | (283) | |||||||||||||||||||||||||
| Fair value adjustments included in OCI | — | — | 16 | — | |||||||||||||||||||||||||
| Fair value adjustments included in earnings | (3,778) | (4,117) | — | 8 | |||||||||||||||||||||||||
| December 31, 2025 | $ | 8,082 | $ | 8,490 | $ | 492 | $ | 7,195 | |||||||||||||||||||||
(1) Certain derivative assets were transferred between Level 2 and Level 3 of the fair value hierarchy due to a change in the availability of an observable forward-rate curve for the duration of the contract.
The following table presents quantitative information about significant unobservable inputs related to United’s material categories of Level 3 assets and liabilities, excluding servicing rights which are detailed in Note 10:
| Level 3 Assets and Liabilities | Valuation Technique | December 31, | ||||||||||||||||||||||||||||||||||||
| Significant Unobservable Inputs | 2025 | 2024 | ||||||||||||||||||||||||||||||||||||
| Range | Weighted Average | Range | Weighted Average | |||||||||||||||||||||||||||||||||||
| Derivative assets - mortgage | Internal model | Pull through rate | 60.0% - 100% | 91.6% | 70.4% - 100% | 91.6% | ||||||||||||||||||||||||||||||||
| Derivative assets & liabilities - other | Dealer priced | Dealer priced | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||
| Contingent consideration receivable | Discounted cash flow | Discount rate | 6.7 - 6.7 | 6.7 | 0.0-7.1 | 6.4 | ||||||||||||||||||||||||||||||||
| Probability of achievement | 82.6 - 100 | 88.2 | 89.3 - 100.0 | 92.6 | ||||||||||||||||||||||||||||||||||
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. 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.
| Mortgage Loans Held for Sale | |||||||||||||||||
| December 31, | |||||||||||||||||
(in thousands) | 2025 | 2024 | |||||||||||||||
| Outstanding principal balance | $ | 38,187 | $ | 56,097 | |||||||||||||
| Fair value | 39,381 | 57,534 | |||||||||||||||
(in thousands) | Amount of Gain (Loss) Recognized on Mortgage Loans Held for Sale | |||||||||||||||||||||||||
| Location | 2025 | 2024 | 2023 | |||||||||||||||||||||||
| Mortgage loan gains and other related fees | $ | (243) | $ | 217 | $ | 900 | ||||||||||||||||||||
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 lower of 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 all assets that were still held as of December 31, 2025 and 2024, for which a nonrecurring fair value adjustment was recorded during the periods presented.
(in thousands) | ||||||||||||||||||||||||||||||||
| December 31, 2025 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||
| Loans held for investment | $ | — | $ | — | $ | 19,216 | $ | 19,216 | ||||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||||||||
| Loans held for investment | $ | — | $ | — | $ | 27,313 | $ | 27,313 | ||||||||||||||||||||||||
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 been assigned a specific reserve. Nonaccrual loans that are collateral dependent are generally written down to net realizable value, which reflects fair values 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 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, wealth management network, deferred income taxes, premises and equipment and goodwill. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.
Off-balance sheet instruments (commitments to extend credit and standby letters of credit) for which draws can be reasonably predicted are generally short-term and at variable rates. Therefore, both the carrying amount and the estimated fair value associated with these instruments are immaterial.
The carrying amount and fair values for other financial instruments that are not measured at fair value on a recurring basis in United’s consolidated balance sheets are as follows:
(in thousands) | Carrying Amount | Fair Value Level | ||||||||||||||||||||||||||||||
| December 31, 2025 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||
| HTM debt securities | $ | 2,237,356 | $ | 19,039 | $ | 1,899,387 | $ | — | $ | 1,918,426 | ||||||||||||||||||||||
| Loans, net | 19,173,888 | — | — | 18,651,481 | 18,651,481 | |||||||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||
| Deposits | 23,798,430 | — | 23,790,107 | — | 23,790,107 | |||||||||||||||||||||||||||
| Long-term debt | 120,400 | — | — | 120,279 | 120,279 | |||||||||||||||||||||||||||
December 31, 2024 | ||||||||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||
| HTM debt securities | $ | 2,368,107 | $ | 18,162 | $ | 1,925,964 | $ | — | $ | 1,944,126 | ||||||||||||||||||||||
| Loans, net | 17,968,982 | — | — | 17,325,630 | 17,325,630 | |||||||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||
| Deposits | 23,460,975 | — | 23,453,487 | — | 23,453,487 | |||||||||||||||||||||||||||
| Long-term debt | 254,152 | — | — | 248,657 | 248,657 | |||||||||||||||||||||||||||
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.