United Community Banks, Inc. Reports Net Income of $17.7 Million for First Quarter 2015, Up 15 Percent From a Year Ago

– Earnings per diluted share of 29 cents, up 16 percent from first quarter of 2014
– Loans up $116 million, or 10 percent annualized
– Core transaction deposits up $206 million, or 22 percent annualized
– Net interest margin holds steady at 3.31 percent
– Regulatory approvals received for acquisition of MoneyTree Corporation /First National Bank
– Announced merger with Palmetto Bancshares

GREENVILLE, SC – United Community Banks, Inc. (Nasdaq:UCBI) (“United”) today reported net income of $17.7 million, or 29 cents per diluted share, for the first quarter of 2015. Earnings per share were up 16 percent from a year ago. The increase reflects strong loan and core deposit growth, a stable net interest margin and growth in fee revenue.

“I am very pleased with our strong first quarter financial results and our outlook for the remainder of the year,” said Jimmy Tallent, chairman and chief executive officer. “We had solid loan growth and a
steady net interest margin. Fee revenue was up with meaningful increases in our mortgage and brokerage businesses and higher gains from our SBA lending business. Our return on assets was .94 percent, and return on equity was 9.3 percent.”

Tallent continued, “The first quarter also included three non-core items. We repaid $6 million in structured repurchase agreements that we were paying 4 percent interest, and redeemed $15.5 million in trust preferred securities that we were paying an average rate of 11 percent interest, resulting in total prepayment charges of $1.04 million that were included in fee revenue. Repayment of these instruments will result in approximately $1.9 million in annual interest savings. Also, we paid the FDIC $690,000 to close the loss sharing agreements related to our acquisition of Southern Community Bank in June of 2009. In addition to administrative cost savings, we will now retain 100 percent of the recoveries from previously covered losses. This will more than offset the $690,000 payment within the next two years. And, we had securities gains of $1.54 million that offset most of the $1.73 million impact of these other non-core items.”

Tallent continued, “First quarter net loan growth of $116 million was driven by strong loan production of $423 million across all United markets. Our community banks originated $314 million of loan production while our specialized lending area, which includes our health care, corporate, SBA, asset-based, middle market and commercial real estate lending businesses, produced $108 million. Core deposit growth was another contributing factor with a linked-quarter increase of $206 million, or 22 percent annualized. Increased demand deposits in our Atlanta and north Georgia markets drove over half of this growth.”

First quarter taxable equivalent net interest revenue totaled $57.6 million, down $715,000 from the fourth quarter and up $3.45 million from the first quarter of 2014. The taxable equivalent net interest margin of 3.31 percent held steady with the prior quarter and was up 10 basis points from a year ago. Along with loan growth, this drove the increase in net interest revenue.

“The linked quarter decrease in net interest revenue was due to two fewer days of interest accruals in the first quarter,” said Tallent. “We’ve been able to hold the margin steady in the low 3.30 percent range following our second quarter 2014 balance sheet management activities, which included restructuring the securities portfolio, interest rate hedges and wholesale borrowings. However, we continue to see loan pricing pressures and expect our margin to decline slightly through the balance of 2015. With only a modest decline, we expect loan growth to drive increases in net interest revenue going forward.”

The first quarter provision for credit losses was $1.8 million, equal to the fourth quarter and down $700,000 from the first quarter of 2014. First quarter net charge-offs were $2.56 million compared with $2.51 million in the fourth quarter and $4.04 million a year ago. Nonperforming assets to total assets were .26 percent, equal to last quarter and down from .42 percent a year ago.

First quarter fee revenue totaled $15.7 million, up $859,000 from the fourth quarter and $3.51 million from the first quarter of 2014. The increase from a year ago resulted primarily from the growing SBA lending and mortgage businesses and the related gains on sales of loans. SBA loan sale gains totaled $1.14 million in the first quarter of 2015 and $926,000 in the fourth quarter of 2014. There were no gains from SBA loan sales in the first quarter of 2014. Mortgage fees were up $644,000 from the fourth quarter and $1.40 million from a year ago, reflecting strong growth in new home purchases and an increase in refinancing activity. Closed mortgage loans totaled $87.9 million in the first quarter of 2015, compared with $77.4 million and $46.0 million, respectively, in the fourth and first quarters of 2014.

First quarter brokerage fees of $1.55 million from United’s advisory services business were up $375,000 from both the fourth and first quarters of 2014. Service charges and fees were down from both of these same prior quarters, mostly reflecting the declining trend in overdraft fees.

Tallent added, “The growing SBA lending business and the increase in mortgage and brokerage fees reflect our commitment to diversifying the revenue stream by focusing on fee generating products and services.”

Operating expenses were $43.1 million in the first quarter compared to $41.9 million in the fourth quarter and $39.1 million a year ago. Excluding the non-core items in other operating expenses noted below,
total core operating expenses were $42.4 million in the first quarter 2015 compared to $42.6 million in the fourth quarter and $39.1 million a year ago. The current quarter is down slightly compared to the fourth quarter and up $3.3 million from a year ago. The increase from a year ago was driven by higher salaries and employee benefit costs, and an increase in other operating costs.

First quarter salaries and employee benefits expense of $26.4 million was down $146,000 from the fourth quarter but up $2.05 million from a year ago. The increase from a year ago reflects investment in new producers and support staff for the specialized lending area, and higher commissions and incentives associated with growth in the mortgage and advisory services businesses, as well as growth in commercial loans and core deposits. Other operating expenses of $5.25 million for the first quarter were up $1.33 million and $1.40 million, respectively, from the fourth and first quarters of 2014. First quarter 2015 other operating expenses included a non-core charge of $690,000 associated with closing all loss sharing agreements with the FDIC, as noted earlier. The fourth quarter of 2014 included a $492,000 charge related to the FDIC’s adjustment for interest claimed on the first loss share filing which was more than offset by a $1.2 million reversal of a previously established litigation reserve. Excluding these non-core items, other operating expenses were down slightly from the fourth quarter and up $705,000 from a year ago due to higher travel and lending-related costs to support loan growth.

“During the first quarter we received regulatory approvals for the previously announced merger with MoneyTree Corporation and its subsidiary First National Bank,” Tallent said. “We expect the transaction to close as planned on May 1, with conversion of the operating systems by mid-July. We look forward to expanding our Tennessee markets and welcoming the First National team of bankers to the United family.”

At March 31, 2015, capital ratios were as follows: Tier 1 Risk-Based of 11.5 percent; Total Risk-Based of 12.8 percent; Tier 1 Common Risk-Based of 11.5 percent; and, Tier 1 Leverage of 8.7 percent.

“We are off to a solid start in 2015, including strong growth in loans, core deposits and fee revenue,” Tallent said. “We are excited about executing our growth strategies to expand the franchise and add value for shareholders. In addition to the completion of the MoneyTree transaction on May 1, we announced earlier today an agreement to acquire $1.2 billion-asset Palmetto Bancshares, Inc. and its 108 year-old bank – The Palmetto Bank – in Greenville, South Carolina. The addition of MoneyTree will significantly increase our market share and customer base in eastern Tennessee, and the addition of Palmetto will make us the number one community bank in Upstate South Carolina.”

Conference Call

United will hold a conference call today, Wednesday, April 22, 2015, at 11 a.m. ET to discuss the contents of this news release and the separate news release regarding United’s merger with Palmetto Bancshares, Inc., and to share business highlights for the quarter. To access the call, dial (877) 380-5665 and use the conference number 15339428. 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.

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About United Community Banks, Inc.

United Community Banks, Inc. (UCBI) is a bank holding company based in Blairsville, Georgia, with $7.7 billion in assets. The company’s banking subsidiary, United Community Bank, is one of the Southeast’s largest full-service banks, operating 104 offices in Georgia, North Carolina, South Carolina and Tennessee. The bank specializes in personalized community banking services for individuals, small businesses and corporations. A full range of consumer and commercial banking services includes mortgage, advisory, treasury management and other products. In 2014, United Community Bank was ranked first in customer satisfaction in the southeast by J.D. Power and in 2015 was ranked fourteenth on the Forbes list of America’s Best Banks. Additional information about the company and the bank’s full range of products and services can be found at www.ucbi.com.