United Community Banks, Inc. and HCSB Financial Corporation Announce Merger Agreement

Friday, April 21st, 2017

United Community Banks, Inc. and HCSB Financial Corporation announced a definitive agreement for United to acquire HCSB and its wholly-owned bank subsidiary, Horry County State Bank, in an all-stock transaction.  The transaction has been unanimously approved by the Board of Directors of each company and is expected to close in the third quarter of 2017.
Horry County State Bank operates banking offices in the Myrtle Beach-Conway-North Myrtle Beach MSA.  The merger will enhance United's position in these fast-growing coastal markets and will provide a unique opportunity for United to offer its expanded banking products to Horry County State Bank's customer base.

Under the terms of the agreement, HCSB shareholders will receive merger consideration consisting of 100 percent stock, with a fixed exchange ratio of .0050 shares of United common stock for each share of HCSB. The transaction is currently valued at approximately $66 million based on United's closing price of $26.70 per share on April 19, 2017.  United will recover HCSB's deferred tax assets and other related tax benefits totaling approximately $11 million.  Reflecting this recovery will result in a pro forma price-to-tangible book value multiple of 142 percent.  The transaction is also expected to be neutral to United's tangible book value per share, including one-time transaction costs, and two percent - or three cents per share - accretive to United's fully diluted earnings per share for 2018, excluding one-time transaction costs.
"This transaction fits squarely in our two-step coastal South Carolina growth strategy executed in 2016," said Jimmy Tallent, Chairman and Chief Executive Officer of United.  "First we placed a team of experienced, in-market lenders in Charleston.  Then we acquired Tidelands Bank with a presence in the Charleston area, Hilton Head and Myrtle Beach.  Acquiring Horry County State Bank enhances our presence in the Myrtle Beach community and creates value for shareholders and customers of both organizations."
Tallent continued, "We are excited to expand our footprint in and around Myrtle Beach, which includes some of the fastest-growing markets in the country.  We are especially glad to do this by joining forces with a well-established and highly respected community bank.  Horry County State Bank's commitment to outstanding customer service is consistent with our own, making this a great culture fit.  The combined franchise will be well-positioned for growth and success."
"Horry County State Bank has made tremendous progress over the past year, and I'm very proud of our team," said Chief Executive Officer Jan Hollar. "Under the new strategic partnership with United, we will maintain exceptional customer service and leverage our strengths over a larger platform.  We are in sync with United's history of living community banking values and look forward to officially joining forces in the third quarter of 2017."
Horry County State Bank will merge into United's bank subsidiary, United Community Bank, and will operate under the United brand.  At December 31, 2016, Horry County State Bank had $376 million in assets and $215 million in loans. Horry County State Bank currently operates eight branches in the Myrtle Beach-Conway-North Myrtle Beach MSA, including one each in Myrtle Beach and North Myrtle Beach proper, and two in adjacent Conway.  The combination adds $313 million of deposits to United's Myrtle Beach franchise, significantly improving its market share in the MSA.  On a pro forma basis, United will have the 5th largest franchise in Myrtle Beach by deposits.
Lynn Harton, President and Chief Operating Officer of United stated, "The transaction with Horry County State Bank is a big win for both organizations - financially, operationally, strategically and culturally.  We are committed to the community focus and customer service tradition of Horry County State Bank, and to providing customers with enhanced products to meet their banking needs."
Completion of the transaction is subject to customary closing conditions, including the receipt of required regulatory approvals and the approval of HCSB's shareholders.
Morgan Stanley & Co. LLC acted as financial advisor to United, and Troutman Sanders LLP served as its legal advisor. Hovde Group, LLC served as HCSB's financial advisor, and Nelson Mullins Riley & Scarborough LLP served as its legal advisor.