United Community Banks, Inc. Announces Third Quarter Earnings

Diluted earnings per share up six percent, to 38 cents, from third quarter 2016
Excluding merger-related and other non-operating charges,
diluted operating EPS up five percent, to 41 cents
• Net interest revenue of $89.8 million, up $10.8 million or 14 percent from year ago
• Net interest margin of 3.54 percent, up seven basis points from second quarter and up 20 basis points from year ago
• Return on assets of 1.01 percent, or 1.09 percent excluding merger-related and other charges
• Efficiency ratio of 59.3 percent, or 56.2 percent excluding merger-related and other charges
• Completed the acquisition of Horry County State Bank during the quarter

BLAIRSVILLE, Ga., Oct. 24, 2017 (GLOBE NEWSWIRE) -- United Community Banks, Inc. (NASDAQ:UCBI) ("United") today announced strong third quarter results with meaningful margin expansion, disciplined expense management and sound credit quality. Net income was $27.9 million, or 38 cents per diluted share, compared with $25.9 million, or 36 cents per diluted share, for the third quarter of 2016.

On an operating basis, net income rose to $30.2 million for the third quarter of 2017 compared with $27.8 million for the third quarter of 2016. Third quarter 2017 operating net income excludes merger-related and other non-operating charges totaling $2.27 million, net of the associated income tax benefit. Third quarter 2016 operating net income excludes $1.96 million in merger-related charges, net of the associated income tax benefit.

On a per diluted share basis, operating net income was 41 cents for the third quarter of 2017 compared with 39 cents for the third quarter of 2016.

At September 30, 2017, preliminary regulatory capital ratios were as follows. Tier 1 Risk-Based of 12.3 percent; Total Risk-Based of 13.0 percent; Common Equity Tier 1 Risk-Based of 12.2 percent, and Tier 1 Leverage of 9.3 percent.

"Our third quarter results demonstrate United bankers' ability to overcome challenges and produce solid financial results," said Jimmy Tallent, chairman and chief executive officer. "In the third quarter, we became subject to the Durbin amendment of the Dodd Frank Wall Street Reform and Consumer Protection Act which places a cap on the amount banks can charge merchants for debit card interchange fees. We also became subject to the large bank deposit insurance assessment model. The combined effect of these two items reduced our pre-tax earnings by approximately $3.4 million, or three cents per share, in the third quarter. We had been actively preparing for this for two years and our bankers were able to completely offset the impact through a higher net interest margin and disciplined expense controls.

"Despite these challenges and excluding merger-related and other non-operating charges, our third quarter operating efficiency ratio held steady at 56.2 percent, our best in more than a decade," Tallent stated. "Including merger and other non-operating charges, the efficiency ratio was 59.3 percent. Clearly our bankers delivered solid financial performance by every measure."

Tallent continued, "We also completed the acquisition of Horry County State Bank on July 31st, significantly enhancing our presence in the Myrtle Beach area along the South Carolina coast. The acquisition of Horry County State Bank, which is part of our larger, ongoing expansion strategy in the high-growth South Carolina coast will accelerate our growth in this attractive market. We are all set for systems conversions in mid-November at which time we expect to achieve all of our cost savings.

"We are scheduled to complete our acquisition of Four Oaks Bank & Trust Company on November 1st which will extend our footprint farther east in North Carolina to the fast-growing Raleigh MSA. All regulatory and shareholder approvals for the transaction have been received. We have long sought to enter this market and are delighted to find an exceptional partner in Four Oaks. I could not be more pleased with these two partnerships and look forward to them becoming part of United.

"Third quarter loan production was $617 million with $434 million originating from our community banks and $183 million from our Commercial Banking Solutions group," Tallent added. "Linked-quarter loans were up $162 million, mostly reflecting the $216 million in net loans received through our acquisition of Horry County State Bank. Our indirect auto loan portfolio was down $48.7 million from second quarter reflecting our decision to suspend indirect auto loan purchases. Excluding the reduction in indirect auto loans and the loans acquired through the Horry acquisition, loan growth was essentially flat from second quarter."

Third quarter net interest revenue totaled $89.8 million, up $10.8 million from the third quarter of 2016 and up $4.6 million from the second quarter. The increases from both periods reflect business growth and net interest margin expansions of 20 basis points from a year ago and seven basis points from the second quarter, mostly driven by rising short-term interest rates as well as the acquisition of Horry County State Bank which was completed on July 31, 2017. Horry County State Bank results are included in United's financial results from the acquisition date.

The third quarter provision for credit losses was $1 million, up from $800,000 for the second quarter. This compares with a provision recovery of $300,000 in the third quarter of 2016. Third quarter net charge-offs totaled $1.6 million, equal to the second quarter of 2017 but up slightly from $1.4 million in the third quarter of 2016. Contributing to the low level of net charge-offs were continued strong recoveries of previously charged-off loans. Nonperforming assets were .23 percent of total assets at September 30, 2017, compared with .30 percent at September 30, 2016 and .24 percent at June 30, 2017.

"We continue to experience strong, steady credit quality and a low level of net charge-offs which is reflected in our low provision for loan losses," Tallent commented. "Our credit quality indicators show no indication of credit deterioration and our outlook is for that to continue. We also expect our provision levels to gradually increase during the year due to loan growth, while our allowance and the related ratio to total loans will decline slightly."
Third quarter fee revenue totaled $20.6 million, down $5.79 million from a year ago and down $3.11 million from the second quarter. The decrease from both prior periods was mostly due to lower debit card interchange fees as a result of the Durbin amendment becoming effective for United on July 1st. The Durbin amendment, which places a cap on the amount of interchange banks can charge merchants for use of their debit cards, reduced United's debit card interchange fees by approximately $2.7 million in the third quarter. Also contributing to the decrease from both prior periods were lower mortgage fees and lower customer derivative fees reflecting a less favorable interest rate environment.

Operating expenses were $65.7 million for the third quarter, compared with $64.0 million for the third quarter of 2016 and $63.2 million for the second quarter. Included in the third quarter's operating expenses are $2.3 million in merger-related expenses and $1.1 million in surplus property impairment charges, totaling $3.4 million. We also had merger-related charges of $3.15 million in the third quarter of 2016, and merger-related and executive retirement charges totaling $1.83 million in the second quarter of 2017. Excluding these charges, third quarter operating expenses were $62.3 million compared with $61.4 million for the second quarter and $60.9 million a year ago. The $855,000 increase from the second quarter was mostly due to higher deposit insurance costs as a result of being assessed under the large bank deposit insurance assessment model effective July 1, and the operating expenses of Horry County State Bank acquired on July 31. These increases were partially offset by lower communications and equipment and advertising and public relations expense.

Tallent concluded, "Our bankers always meet every challenge with diligence and perseverance. That was certainly demonstrated with our third quarter financial results. Their passion and commitment drive our performance and ensure our success. Every day I become more encouraged about the opportunities that lie ahead knowing that our exceptional team of bankers will find success in everything they do. With Horry County State Bank and Four Oaks Bank & Trust Company, we have found two outstanding strategic partners in key growth markets that share our passion for banking and our commitment to customer service. I am excited about the opportunities that these acquisitions create to recruit other talented bankers from within these markets into the United family."

Conference Call
United will hold a conference call today, Wednesday, October 25, 2017, at 11 a.m. ET to discuss the contents of this earnings release and to share business highlights for the quarter. To access the call, dial (877) 380-5665 and use the conference number 90798221. The conference call also will be webcast and available for replay for 30 days by selecting "Events & Presentations" within the Investor Relations section of United's website at www.ucbi.com.

About United Community Banks, Inc.
United Community Banks, Inc. (NASDAQ:UCBI) is a bank holding company based in Blairsville, Georgia with $11.1 billion in assets. The company's banking subsidiary, United Community Bank, is one of the southeast region's largest full-service banks, operating 142 offices in Georgia, North Carolina, South Carolina and Tennessee. The bank specializes in personalized community banking services for individuals, small businesses and corporations. Services include a full range of consumer and commercial banking products including mortgage, advisory, and treasury management. Respected national research firms consistently recognize United Community Bank for outstanding customer service. For the last four years, J.D. Power has ranked United Community Bank first in customer satisfaction in the Southeast. In 2017, for the fourth consecutive year, Forbes magazine included United on its list of the 100 Best Banks in America. Additional information about the company and the bank's full range of products and services can be found at www.ucbi.com.