United Community Banks, Inc.
UNITED COMMUNITY BANKS INC (Form: S-4, Received: 05/17/2017 17:21:22)
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As filed with the Securities and Exchange Commission on May 17, 2017
File No. 333-     ​
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
UNITED COMMUNITY BANKS, INC.
(Exact name of issuer as specified in its charter)
Georgia
6022
58-1807304
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification Number)
United Community Banks, Inc.
125 Highway 515 East
Blairsville, Georgia 30512
(706) 745-2151
Jimmy C. Tallent
125 Highway 515 East
Blairsville, Georgia 30512
(706) 745-2151
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
James W. Stevens
Troutman Sanders LLP
600 Peachtree Street, Suite 5200
Atlanta, Georgia 30308
(404) 885-3721
Neil E. Grayson
Nelson Mullins Riley & Scarborough, LLP
104 S. Main Street, Suite 900
Greenville, South Carolina 29601
(864) 250-2235
Approximate date of commencement of proposed sale of the securities to the public: The exchange of the Registrant’s shares for shares of common stock of HCSB Financial Corporation will take place upon consummation of the merger of HCSB Financial Corporation into the Registrant.
If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. ☐
If this form is filed to register additional securities of an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐ ____________________
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐ ____________________
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of  “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☒ Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company) Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) ☐
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) ☐
CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities to be Registered
Amount to be
Registered
Proposed Maximum
Offering Price per
Share
Proposed Maximum
Aggregate Offering
Price
Amount of
Registration Fee
Common Stock, par value $1.00 per share
2,478,820 (1 )
Not Applicable
$ 64,449,313 (2 ) $ 7,470.00 (3 )
(1)
The number of shares of the Registrant’s common stock being registered hereunder is based upon the anticipated maximum number of such shares required to consummate the proposed merger of HCSB Financial Corporation, a South Carolina corporation, into the Registrant. The Registrant will remove from registration by means of a post-effective amendment any shares being registered that are not issued in connection with such merger.
(2)
Estimated solely for the purpose of calculating the registration fee required by Section 6(b) of the Securities Act of 1933 pursuant to Rules 457(c) and 457(f)(1) of the Securities Act. The proposed maximum aggregate offering price of the registrant’s common stock was calculated based upon the market value of shares of common stock, par value $0.01 per share, of HCSB Financial Corporation (“HCSB common stock”) in accordance with Rule 457(c) under the Securities Act as the product of  (i) $0.13, the average of the high and low prices of HCSB common stock as reported on OTCQB on May 16, 2017, and (ii) 495,763,940, the estimated maximum possible number of shares of HCSB common stock which may be canceled and exchanged in the merger, including shares of HCSB common stock issuable pursuant to equity awards.
(3)
Computed pursuant to Rules 457(f)(1) and 457(c) of the Securities Act, based on a rate of  $115.90 per $1,000,000 of the proposed maximum aggregate offering price.
The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Commission acting pursuant to said Section 8(a) may determine.

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The information in this document is not complete and may be changed. We may not sell the securities offered by this document until the registration statement filed with the Securities and Exchange Commission is effective. This document is not an offer to sell these securities, and we are not soliciting an offer to buy these securities, in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED MAY 17, 2017
PROXY STATEMENT/PROSPECTUS
[MISSING IMAGE: LG_HCSB.JPG]
[MISSING IMAGE: LG_UNITED-COMMUNITY.JPG]
MERGER PROPOSED — YOUR VOTE IS VERY IMPORTANT
These materials are a proxy statement of HCSB Financial Corporation (“HCSB”) and a prospectus of United Community Banks, Inc. (“United”). They are furnished to you in connection with the notice of the special meeting of shareholders of HCSB to be held on [•], 2017. At the special meeting of HCSB shareholders, you will be asked to vote on the merger of HCSB with and into United described in more detail herein and holders of HCSB voting common stock will be asked to approve, on a non-binding advisory basis, the compensation that certain executive officers of HCSB will receive in connection with the merger pursuant to existing agreements or arrangements with HCSB.
As of  [•], 2017, the record date for the HCSB special meeting of shareholders, there were [•] shares of voting common stock and [•] shares of non-voting common stock issued and outstanding and entitled to vote at that meeting. Holders of HCSB voting common stock will vote on all three proposals. Holders of HCSB non-voting common stock will vote only on the merger proposal. Approval of the merger agreement requires the affirmative vote of  (i) two-thirds of the issued and outstanding shares of HCSB voting common stock and (ii) a majority of the issued and outstanding shares of HCSB non-voting common stock. Approval of the merger-related compensation proposal requires that the number of votes cast at the special meeting, in person or by proxy, in favor of the proposal exceeds the number of votes cast against the proposal. The proposal to adjourn or postpone the special meeting, if necessary or appropriate, including to solicit additional proxies to approve the merger agreement, will be approved if the number of votes cast at the special meeting, in person or by proxy, in favor of the proposal exceeds the number of votes cast against the proposal.
In connection with the merger, if approved and consummated, holders of HCSB voting common stock and non-voting common stock (which we refer to as the “HCSB common stock”) will be entitled to receive, in exchange for each share of HCSB common stock, consideration equal to 0.0050 shares of United common stock.
As a result, a maximum of 2,478,820 shares of United common stock will be issued to HCSB shareholders if the merger is approved and consummated. This document is a United prospectus with respect to the offering and issuance of such 2,478,820 shares of United common stock.
Based on United’s closing price of  $26.70 per share on April 19, 2017, the last trading day before the execution of the merger agreement, the merger consideration represented approximately $0.1335 for each share of HCSB common stock and approximately $66,184,486 million on an aggregate basis. Based on United’s closing price of  $[•] per share on [•], 2017, the last practicable trading day before the date of the enclosed document, the merger consideration represented approximately $[•] for each share of HCSB common stock and approximately $[•] million on an aggregate basis. We encourage you to obtain current market quotations for United common stock and HCSB common stock before you vote. United’s common stock is traded on the NASDAQ Global Select Market under the symbol “UCBI,” and HCSB’s voting common stock is traded on the OTCQB tier of the OTC Markets Group Inc. under the symbol “HCFB.”
The accompanying materials contain information regarding the proposed merger and the companies participating in the merger, and the Agreement and Plan of Merger pursuant to which the merger will be consummated if approved. We encourage you to read the entire document carefully, including the “Risk Factors” section beginning on page 19 , for a discussion of the risks related to the proposed merger.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of these materials. Any representation to the contrary is a criminal offense. Shares of common stock of United are not savings accounts, deposits or other obligations of any bank and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency.
The date of these materials is [•], 2017, and they are expected to be first mailed to shareholders on or about [•] , 2017.

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WHERE YOU CAN FIND MORE INFORMATION
Both United and HCSB are subject to the information requirements of the Securities Exchange Act of 1934, which means that they are both required to file certain reports, proxy statements, and other business and financial information with the Securities and Exchange Commission (“SEC”). You may read and copy any materials that either United or HCSB files with the SEC at the Public Reference Room of the SEC at 100 F. Street N.E., Washington, D.C. 20549. You may also obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a website at http://www.sec.gov where you can access reports, proxy, information and registration statements, and other information regarding registrants that file electronically with the SEC. Such filings are also available free of charge at United’s website at http://www.ucbi.com under the “Investor Relations” heading or from HCSB’s website at http://www.hcsbaccess.com under the “Investor Information” link under the “About Us” heading. Except as specifically incorporated by reference into this document, information on those websites or filed with the SEC is not part of this document.
United has filed a registration statement on Form S-4 of which this document forms a part. As permitted by SEC rules, this document does not contain all of the information included in the registration statement or in the exhibits or schedules to the registration statement. You may read and copy the registration statement, including any amendments, schedules and exhibits, at the addresses set forth below. Statements contained in this document as to the contents of any contract or other documents referred to in this document are not necessarily complete. In each case, you should refer to the copy of the applicable contract or other document filed as an exhibit to the registration statement. This document incorporates by reference documents that United and HCSB have previously filed, and that they may file through the date of the special meeting of HCSB shareholders, with the SEC. They contain important information about the companies and their financial condition. For further information, please see the section entitled “Incorporation of Certain Documents by Reference.” These documents are available without charge to you upon written or oral request to the applicable company’s principal executive offices. The respective addresses and telephone numbers of such principal executive offices are listed below.
United Community Banks, Inc.
125 Highway 515 East
Blairsville, Georgia 30512
Attention: Investor Relations
(706) 781-2265
HCSB Financial Corporation
3640 Ralph Ellis Boulevard
Loris, South Carolina 29569
Attention: Jennifer W. Harris
(843) 716-4272
To obtain timely delivery of these documents, you must request the information no later than [•], 2017 in order to receive them before HCSB’s special meeting of shareholders.
United’s common stock is traded on the NASDAQ Global Select Market under the symbol “UCBI,” and HCSB’s voting common stock is traded on the OTCQB tier of the OTC Markets Group Inc. under the symbol “HCFB.”

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HCSB FINANCIAL CORPORATION
3640 Ralph Ellis Boulevard
Loris, South Carolina 29569
Notice Of Special Meeting Of Shareholders
To Be Held On [•] , 2017
A special meeting of shareholders of HCSB Financial Corporation will be held on [•], 2017, at [•] a.m., at [•] for the following purposes:
1.
To consider and vote on the Agreement and Plan of Merger, under which HCSB Financial Corporation (“HCSB”) will merge with and into United Community Banks, Inc. (“United”), as more particularly described in the accompanying materials;
2.
To cast a non-binding advisory vote to approve the compensation that certain executive officers of HCSB will receive under existing agreements or arrangements with HCSB in connection with the merger;
3.
To consider and vote upon a proposal to approve the adjournment or postponement of the special meeting, if necessary or appropriate, including to solicit additional proxies to approve the merger agreement; and
4.
To transact such other business as may properly come before the special meeting or any adjournments of the special meeting.
If HCSB shareholders approve the merger agreement, HCSB will be merged with and into United. HCSB shareholders will receive 0.0050 shares of United common stock in exchange for each of their shares of HCSB common stock in the merger.
Holders of HCSB voting common stock will vote on all three proposals. Holders of HCSB non-voting common stock will vote only on the merger proposal. Approval of the merger agreement requires the affirmative vote of  (i) two-thirds of the issued and outstanding shares of HCSB voting common stock and (ii) a majority of the issued and outstanding shares of HCSB non-voting common stock. Approval of the merger-related compensation proposal requires that the number of votes cast at the special meeting, in person or by proxy, in favor of the proposal exceeds the number of votes cast against the proposal. Approval of the adjournment proposal requires that the number of votes cast at the special meeting, in person or by proxy, in favor of the proposal exceeds the number of votes cast against the proposal. Only shareholders of record of HCSB common stock at the close of business on [•], 2017 will be entitled to vote at the special meeting or any adjournments thereof. HCSB’s Board of Directors has adopted a resolution approving the merger and the merger agreement and unanimously recommends that you vote “FOR” the proposal to approve the merger agreement, “FOR” the merger-related compensation proposal, and “FOR” the adjournment proposal.
Business and financial information about HCSB is available without charge to you upon written or oral request made to HCSB Financial Corporation, 3640 Ralph Ellis Boulevard, Loris, South Carolina 29569, Attention: Jennifer W. Harris, telephone number (843) 716-4272. To obtain delivery of such business and financial information before the special meeting, your request must be received no later than [•], 2017.
YOUR VOTE IS VERY IMPORTANT . You can vote your shares over the internet or by telephone. If you requested or received a paper proxy card or voting instruction form by mail, you may also vote by signing, dating and returning your proxy card or voting instruction form. If you are the record holder of the shares, you may change your vote by: (1) if you voted over the internet or by telephone, voting again over the internet or by telephone by the applicable deadline described herein; (2) if you previously completed and returned a proxy card, submitting a new proxy card with a later date and returning it to HCSB prior to the vote at the special meeting; (3) submitting timely written notice of revocation to HCSB’s Corporate Secretary, D. Singleton Bailey, at HCSB Financial Corporation, 3640 Ralph Ellis Boulevard, Loris, South Carolina 29569, at any time prior to the vote at the special meeting; or (4) attending the special meeting in person and voting your shares at the special meeting. If your shares are held in street name, you

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may change your vote by submitting new voting instructions to your brokerage firm, bank or other similar entity or, if you have obtained a legal proxy from your brokerage firm, bank, or other similar entity giving you the right to vote your shares, you may change your vote by attending the special meeting and voting in person.
By Order of the Board of Directors,
[•], 2017
Loris, South Carolina
   
Jan H. Hollar, Chief Executive Officer

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Appendix A — Agreement and Plan of Merger
Appendix B — South Carolina Statutes for Dissenters’ Rights
Appendix C — Fairness Opinion of Hovde Group, LLC
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QUESTIONS AND ANSWERS ABOUT THE MERGER
Q:
What am I being asked to approve?
A:
HCSB shareholders are being asked to (1) approve the Agreement and Plan of Merger between HCSB and United, pursuant to which HCSB will be merged with and into United, (2) approve, on a non-binding advisory basis, the compensation that certain executive officers of HCSB will receive in connection with the merger pursuant to existing agreements or arrangements with HCSB, and (3) approve a proposal to adjourn or postpone the special meeting, if necessary or appropriate, including to solicit additional proxies to approve the merger agreement. Holders of HCSB voting common stock will vote on all three proposals. Holders of HCSB non-voting common stock will vote only on the merger proposal. Approval of the merger agreement requires the affirmative vote of (i) two-thirds of the issued and outstanding shares of HCSB voting common stock and (ii) a majority of the issued and outstanding shares of HCSB non-voting common stock. Approval of the merger-related compensation proposal requires that the number of votes cast at the special meeting, in person or by proxy, in favor of the proposal exceeds the number of votes cast against the proposal. Approval of the adjournment proposal requires that the number of votes cast at the special meeting, in person or by proxy, in favor of the proposal exceeds the number of votes cast against the proposal. The HCSB Board of Directors has unanimously approved and adopted the merger and the merger agreement and recommends voting “FOR” approval of the merger agreement, “FOR” approval of the merger-related compensation proposal, and “FOR” approval of the adjournment proposal.
Q:
When is the merger expected to be completed?
A:
We plan to complete the merger during the third quarter of 2017.
Q:
What will I receive in the merger?
A:
Holders of HCSB voting common stock and non-voting common stock (which we refer to as the “HCSB common stock”) will receive 0.0050 shares (which we refer to as the “exchange ratio”) of United common stock for each share of HCSB common stock. United will not issue fractional shares in the merger. Instead, you will receive a cash payment, without interest, for the value of any fraction of a share of United common stock that you would otherwise be entitled to receive in an amount equal to such fractional part of a share of United common stock multiplied by the purchase price per share of HCSB common stock as determined by multiplying (i) the exchange ratio by (ii) the closing price for United common stock on the NASDAQ Global Select Market trading day immediately preceding the effective time of the merger.
To review what you will receive in the merger in greater detail, see “Proposal No. 1 — The Merger — The Merger Consideration” beginning on page 35.
Q:
What should I do now?
A:
After you have carefully read this document, please vote by proxy over the internet, by telephone or through the mail. If you hold shares of HCSB common stock in more than one account, you must vote all shares over the internet, by telephone or through the mail. If you vote over the internet or by telephone, you do not need to return any documents through the mail.
If you vote using one of the methods described below, you will be designating Michael S. Addy and Jan H. Hollar as your proxies to vote your shares as you instruct. If you vote over the internet or by telephone or by signing and returning your proxy card without giving specific voting instructions, these individuals will vote your shares by following the recommendations of the HCSB Board of Directors. If any other business properly comes before the special meeting, these individuals will vote on those matters in a manner they consider appropriate.
Registered Holder :   You do not have to attend the special meeting to vote. The HCSB Board of Directors is soliciting proxies so that you can vote before the special meeting. Even if you currently plan to attend the special meeting, we recommend that you vote by proxy before the special meeting so
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that your vote will be counted if you later decide not to attend. However, if you attend the special meeting and vote your shares by ballot, your vote at the special meeting will revoke any vote you submitted previously by proxy. If you are the record holder of your shares, there are three ways you can vote by proxy:

By Internet: You may vote over the internet by going to [•] and following the instructions when prompted;

By Telephone: You may vote by telephone by calling toll free [•]; or

By Mail: You may vote by completing, signing, dating and returning the enclosed proxy card.
Street Holder :   If your shares are held in street name, you may vote your shares before the special meeting by mail, by completing, signing, and returning the voting instruction form you received from your brokerage firm, bank or other similar entity. You should check your voting instruction form to see if any alternative method, such as internet or telephone voting, is available to you.
Q:
What constitutes a quorum for the special meeting?
A:
The presence at the special meeting, in person or by proxy, of holders of a majority of the outstanding shares of HCSB voting common stock and HCSB non-voting common stock entitled to vote at the special meeting will constitute a quorum for the transaction of business. Abstentions and broker non-votes, if any, will be included in determining the number of shares present at the meeting for the purpose of determining the presence of a quorum.
Q:
What vote is required to approve each proposal?
A:
Approval of the merger agreement requires the affirmative vote of  (i) two-thirds of the issued and outstanding shares of HCSB voting common stock and (ii) a majority of the issued and outstanding shares of HCSB non-voting common stock. If you fail to vote, mark “ABSTAIN” on your proxy, or fail to instruct your brokerage firm, bank, or other similar entity giving you the right to vote your shares with respect to the merger proposal, it will have the same effect as a vote “AGAINST” the proposal. Approval of the merger-related compensation proposal requires that the number of votes cast at the special meeting, in person or by proxy, in favor of the proposal exceeds the number of votes cast against the proposal. Approval of the adjournment proposal requires that the number of votes cast at the special meeting, in person or by proxy, in favor of the proposal exceeds the number of votes cast against the proposal.
Q:
What impact will my vote have on the amounts that certain executive officers of HCSB may receive in connection with the merger?
A:
Certain of HCSB’s executive officers are entitled, pursuant to the terms of their existing employment agreements with HCSB, to receive certain payments in connection with the merger. If the merger is completed, HCSB is contractually obligated to make these payments to these executives under certain circumstances. Accordingly, even if the HCSB shareholders vote not to approve these payments, the compensation will be payable, subject to the terms and conditions of the agreements. HCSB is seeking your approval of these payments on a non-binding advisory basis in order to comply with Section 951 of the Dodd-Frank Act and Rule 14a-21(c) under the Securities Exchange Act of 1934.
Q:
Why is my vote important?
A:
If you do not return your proxy, it will be more difficult for HCSB to obtain the necessary quorum to hold the special meeting. In addition, your failure to submit a proxy or vote in person, or failure to instruct your brokerage firm, bank, or other similar entity how to vote, or abstention will have the same effect as a vote “AGAINST” approval of the merger agreement, as applicable. The merger agreement must be approved by the affirmative vote of  (i) two-thirds of the issued and outstanding shares of HCSB voting common stock and (ii) a majority of the issued and outstanding shares of HCSB non-voting common stock. The HCSB Board of Directors unanimously recommends that you vote “FOR” the merger proposal.
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Q:
What information should I consider?
A:
We encourage you to read carefully this entire document and the documents incorporated by reference herein. Among other disclosures, you should review the factors considered by each company’s Board of Directors discussed in “Proposal No. 1 — The Merger — Background of the Merger” beginning on page 21 and “Proposal No. 1 — The Merger — HCSB’s Reasons for the Merger and Recommendation of the HCSB Board of Directors” beginning on page 24.
Q:
Will my ownership percentage and voting interest be reduced after the merger?
A:
Yes. HCSB shareholders currently have the right to vote in the election of the HCSB Board of Directors and on other matters affecting HCSB. Upon the completion of the merger, each HCSB shareholder receiving shares of United common stock in accordance with the merger agreement will be a shareholder of United with a percentage ownership of United that is smaller than such shareholder’s current percentage ownership of HCSB. It is currently expected that the former shareholders of HCSB as a group will receive shares in the merger constituting approximately [•]% of the outstanding shares of United’s common stock immediately after the merger. Because of this, HCSB shareholders will have less influence on the management and policies of United than they now have on the management and policies of HCSB.
Q:
What are the tax consequences of the merger to me?
A:
The merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”). Accordingly, HCSB’s shareholders generally will not recognize gain or loss for federal income tax purposes on the exchange of shares of HCSB common stock for United common stock, except with respect to cash received in lieu of fractional shares of United common stock or upon the exercise of dissenters’ rights. The tax consequences to HCSB shareholders are described in greater detail in “Proposal No. 1 — The Merger — Material Federal Income Tax Consequences and Opinion of Tax Counsel” beginning on page 50. Your tax consequences will depend on your personal situation. You should consult your tax adviser for a full understanding of the tax consequences of the merger to you.
Q:
Are HCSB shareholders entitled to dissenters’ rights?
A:
Yes. HCSB shareholders are entitled to dissenters’ rights under Chapter 13 of the South Carolina Business Corporation Act of 1988 (the “SCBCA”), provided they satisfy the special criteria and conditions set forth in Chapter 13 of the SCBCA. More information regarding these dissenters’ rights is provided in this document, and the provisions of the SCBCA that grant dissenters’ rights and govern such procedures are attached as Appendix B to this document. You should read these provisions carefully and in their entirety. See “Dissenters’ Rights” beginning on page 49.
Q:
Should I send in my stock certificates now?
A:
No. After the merger is completed, you will receive written instructions from United or its exchange agent, Continental Stock Transfer & Trust Company, for exchanging your HCSB common stock certificates for United common stock.
Q:
Who should I call with questions?
A:
You should call Jennifer W. Harris, HCSB Financial Corporation, at (843) 716-4272.
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SUMMARY
This summary highlights material information from these materials regarding the proposed merger. For a more complete description of the terms of the proposed merger, you should carefully read this entire document and the documents incorporated by reference into this document. The Agreement and Plan of Merger, which is the legal document that governs the proposed merger, is in Appendix A to these materials. In addition, the sections entitled “Where You Can Find More Information”, in the forepart of this document, and “Incorporation of Certain Documents By Reference”, on page 59, contain references to additional sources of information about United and HCSB.

The Companies (see pages 54 and 57)
United Community Banks, Inc.
125 Highway 515 East
Blairsville, Georgia 30512
(706) 745-2151
United is the third largest bank holding company headquartered in Georgia. At March 31, 2017, United had total consolidated assets of  $10.7 billion, total loans of  $6.96 billion, total deposits of  $8.75 billion and shareholders’ equity of  $1.10 billion. United conducts substantially all of its operations through its wholly-owned Georgia bank subsidiary, United Community Bank (the “Bank”), which as of March 31, 2017, operated at 134 offices in Georgia, North Carolina, South Carolina and Tennessee.
United’s community banks offer a full range of retail and corporate banking services, including checking, savings and time deposit accounts, secured and unsecured loans, wire transfers, brokerage services and other financial services, and are led by local bank presidents and management with significant experience in, and ties to, their communities. Each of the local bank presidents has authority, alone or with other local officers, to make most credit decisions.
United also operates United Community Mortgage Services, a full-service retail mortgage lending operation approved as a seller/servicer for Fannie Mae and the Federal Home Mortgage Corporation, as a division of the Bank. The Bank owns an insurance agency, United Community Insurance Services, Inc., known as United Community Advisory Services. United also owns a captive insurance subsidiary, United Community Risk Management Services, Inc., that provides risk management services for United’s subsidiaries. Another subsidiary of the Bank, United Community Payment Systems, LLC, provides payment processing services for the Bank’s commercial and small business customers. Additionally, United provides retail brokerage services through a third party broker/dealer.
United was incorporated in 1987, as a Georgia corporation. Its principal executive offices are located at 125 Highway 515 East, Blairsville, Georgia 30512, and its telephone number is (706) 781-2265. Its website is http://www.ucbi.com. Information on United’s website is not incorporated into this document by reference and is not a part hereof.
For a complete description of United’s business, financial condition, results of operations and other important information, please refer to United’s filings with the SEC that are incorporated by reference in this document, including its Annual Report on Form 10-K for the year ended December 31, 2016 and its quarterly report on Form 10-Q for the quarter ended March 31, 2017. For instructions on how to find copies of these documents, see “Where You Can Find More Information.”
HCSB Financial Corporation
3640 Ralph Ellis Boulevard
Loris, South Carolina 29569
(843) 716-4272
HCSB was incorporated on June 10, 1999 to become a holding company for Horry County State Bank. Horry County State Bank is a state chartered bank which commenced operations on January 4, 1988. Horry County State Bank’s primary market includes Horry and Georgetown Counties in South Carolina and Columbus and Brunswick Counties in North Carolina. From Horry County State Bank’s eight branch locations, Horry County State Bank offers a full range of deposit services, including checking
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accounts, savings accounts, certificates of deposit, money market accounts, and IRAs. In addition, Horry County State Bank offers a variety of loan products designed for consumers, businesses and farmers. As of March 31, 2017, HCSB had total consolidated assets of  $384.0 million, net loans of  $225.3 million, deposits of  $322.3 million and shareholders’ equity of  $36.1 million.
For a complete description of HCSB’s business, financial condition, results of operations and other important information, please refer to HCSB’s filings with the SEC that are incorporated by reference in this document, including its Annual Report on Form 10-K, as amended on Form 10-K/A, for the year ended December 31, 2016 and its quarterly report on Form 10-Q for the quarter ended March 31, 2017. For instructions on how to find copies of these documents, see “Where You Can Find More Information.”

The Merger Agreement (see page 35)
If HCSB shareholders approve the merger agreement, subject to receipt of the required regulatory approvals and satisfaction of the other closing conditions, HCSB will be merged with and into United. Holders of HCSB common stock will receive 0.0050 shares of United common stock for each share of HCSB common stock.
You will also receive a cash payment, without interest, for the value of any fraction of a share of United common stock that you would otherwise be entitled to receive in an amount equal to such fractional part of a share of United common stock multiplied by the purchase price per share of HCSB common stock as determined by multiplying (i) the exchange ratio by (ii) the closing price for United common stock on the NASDAQ Global Select Market trading day immediately preceding the effective time of the merger.
Following the merger, HCSB’s wholly-owned South Carolina bank subsidiary, Horry County State Bank, will be merged with and into the Bank, United’s wholly-owned Georgia bank subsidiary, and the Bank will be the surviving bank.
HCSB’s Reasons for the Merger and Recommendation of the HCSB Board of Directors (see page 24 )
The HCSB Board of Directors supports the merger and believes that it is in the best interests of HCSB and its shareholders. The HCSB Board of Directors believes that the merger will allow HCSB to better serve its customers and markets and that the merger will permit HCSB shareholders to have an equity interest in a resulting financial institution with greater financial resources, more significant economies of scale, and a larger shareholder base, which will increase the liquidity of the HCSB shareholders’ common stock. The HCSB Board of Directors believes that the terms of the merger are fair to and in the best interest of HCSB and its shareholders.
Accounting Treatment (see page 49)
The merger will be accounted for as a purchase of a business for financial reporting and accounting purposes under generally accepted accounting principles in the United States.
Conditions, Termination, and Effective Date (see pages 35 and 36)
The merger will not occur unless certain conditions are met, and United or HCSB can terminate the merger agreement if specified events occur or fail to occur. Following the merger, HCSB’s South Carolina bank subsidiary, Horry County State Bank, will be merged into United’s Georgia bank subsidiary, the Bank.
The merger and the bank merger must be approved by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Department of Banking and Finance of the State of Georgia and the South Carolina State Board of Financial Institutions. As of the date of this document, we have not yet received any of the required regulatory approvals.
The closing of the merger will not occur until after the merger is approved by the foregoing regulators and by the HCSB shareholders, the other conditions to closing have been satisfied and the certificate of merger is filed as required under Georgia law and South Carolina law.
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Federal Income Tax Consequences (see page 50)
The merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. Accordingly, HCSB’s shareholders generally will not recognize gain or loss for federal income tax purposes on the exchange of shares of HCSB common stock for United common stock, except with respect to cash received in lieu of fractional shares of United common stock or upon the exercise of dissenters’ rights. The tax consequences to HCSB shareholders are described in greater detail in “Proposal No. 1 — The Merger — Material Federal Income Tax Consequences and Opinion of Tax Counsel” beginning on page 50. Tax matters are complicated, and the tax consequences of the merger may vary among HCSB shareholders. We urge each HCSB shareholder to contact his or her own tax advisor to fully understand the tax implications of the merger.
Opinion of HCSB’s Financial Advisor (see page 27)
Hovde Group, LLC (“Hovde”) has rendered an opinion to HCSB that based on and subject to the procedures, matters, and limitations described in its opinion and other matters it considered relevant, as of the date of its opinion, the merger consideration is fair from a financial point of view to the shareholders of HCSB. A summary of Hovde’s opinion begins on page 27 and the full opinion is attached as Appendix C to these materials.
Markets for Common Stock
United’s common stock trades on the NASDAQ Global Select Market under the ticker symbol “UCBI.” HCSB’s voting common stock trades on the OTCQB tier of the OTC Markets Group Inc. under the ticker symbol “HCFB.” The following table sets forth, for the periods indicated, the high, low and closing sales prices per share of United’s common stock and HCSB’s voting common stock as quoted on NASDAQ and the OTCQB, respectively.
United Common Stock
HCSB Voting Common Stock
High
Low
Close
High
Low
Close
2017
Second Quarter (through [•], 2017)
$ [•] $ [•] $ [•] $ [•] $ [•] $ [•]
First Quarter
30.47 25.29 27.69 0.59 0.15 0.38
2016
Fourth Quarter
30.22 20.26 29.62 0.19 0.11 0.15
Third Quarter
21.13 17.42 21.02 0.50 0.14 0.18
Second Quarter
20.60 17.07 18.29 0.50 0.16 0.32
First Quarter
19.27 15.74 18.47 0.35 0.16 0.16
2015
Fourth Quarter
22.23 18.61 19.49 0.18 0.16 0.16
Third Quarter
22.23 18.58 20.44 0.18 0.11 0.18
Second Quarter
21.23 17.91 20.87 0.30 0.04 0.15
First Quarter
19.53 16.48 18.88 0.15 0.10 0.10
The closing sales price of United common stock as of April 19, 2017, the last trading day before the merger agreement was announced, was $26.70. The closing sales price of United common stock as of  [•], 2017, the most recent date feasible for inclusion in these materials, was $[•]. Trading in HCSB voting common stock is very limited and sporadic, with an average daily trading volume since January 1, 2017 of less than .005% of the outstanding shares. The closing sales price of HCSB voting common stock as of April 19, 2017, the last trading day before the merger agreement was announced, was $0.35. The closing sales price of HCSB voting common stock as of  [•], 2017, the most recent date feasible for inclusion in these materials, was $[•].
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Assuming there is no adjustment in the merger consideration, if the merger had been completed on April 19, 2017, the implied value of one share of HCSB voting common stock exchanged for 0.0050 of a share of United common stock, would have been $0.1335 based on United’s closing sales price on that date. If the merger had been completed on [•], 2017, the most recent date feasible for inclusion in these materials, the implied value of one share of HCSB voting common stock exchanged for 0.0050 of a share of United common stock, would have been $[•].
There were [•] shareholders of record of HCSB voting common stock as of  [•], 2017. There were [•] shareholders of record of HCSB non-voting common stock as of  [•], 2017.
Dividends (see page 48)
United declared cash dividends of  $0.09 per share of common stock in the first quarter of 2017, $0.30 per share in 2016, $0.22 per share in 2015 and $0.11 per share in 2014. United intends to continue paying cash dividends, but the amount and frequency of cash dividends, if any, will be determined by United’s Board of Directors after consideration of certain non-financial and financial factors including earnings, capital requirements, and the financial condition of United, and will depend on cash dividends paid to it by the Bank. The ability of the Bank to pay dividends to it is restricted by certain regulatory requirements.
No cash dividends were declared on HCSB’s common stock in the first quarter of 2017 or in 2016, 2015 or 2014.
Differences in Legal Rights between Shareholders of HCSB and United (see page 44)
Following the merger you will no longer be a HCSB shareholder and your rights as a shareholder will no longer be governed by HCSB’s articles of incorporation and bylaws and the SCBCA. You will be a United shareholder, and your rights as a United shareholder will be governed by United’s articles of incorporation and bylaws and the Georgia Business Corporation Code. Your former rights as a HCSB shareholder and your new rights as a United shareholder are different in certain ways, including the following:

The articles of incorporation of HCSB authorize more shares of voting common stock and non-voting common stock than the articles of incorporation of United.

The articles of incorporation of United authorize more shares of preferred stock than the articles of incorporation of HCSB.

Holders of HCSB non-voting common stock, who currently have no voting rights except as required by the SCBCA, will have voting rights as holders of United common stock.

The bylaws of HCSB set forth different requirements for calling special meetings of shareholders than do the bylaws of United.

The bylaws of HCSB set forth different advance notice requirements for shareholders proposals than do the bylaws of United.

The bylaws of United provide that the number of directors may range between eight to fourteen directors while the bylaws of HCSB provide that the number of directors may range between five to twenty-five.

The bylaws of HCSB set forth different requirements for removal of directors than do the articles of incorporation of United.

The SCBCA, applicable to HCSB, requires supermajority shareholder approval of certain business transactions while the articles of incorporation and bylaws of United do not provide any supermajority requirement.

The SCBCA, applicable to HCSB, provides for unanimous shareholder action by written consent in lieu of meeting while the bylaws of United require only the minimum number of votes necessary to authorize such action for shareholder action by written consent.
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The bylaws of HCSB do not provide for an exclusive forum for legal proceedings while the bylaws of United provide that the exclusive forum for certain legal proceedings is Georgia.

The articles of incorporation of HCSB generally may be amended upon approval by two-thirds of the votes entitled to be cast on the amendment, while the articles of incorporation of United may be amended upon approval by a majority of the votes entitled to be cast on the amendment.
Interests of Directors and Officers of HCSB and Horry County State Bank in the Merger (see page 42)
Some of the directors and officers of HCSB have interests in the merger in addition to their interests as shareholders generally, including the following:

Each outstanding share of HCSB restricted stock issued to Jan H. Hollar, J. Rick Patterson, and W. Jack McElveen will vest at the effective time of the merger and be converted into the merger consideration.

Employment agreements between HCSB and each of Ms. Hollar and Messrs. Patterson and McElveen provide for change in control compensation upon the completion of the merger.

United will indemnify and provide liability insurance to the present directors and officers of HCSB and Horry County State Bank for a period of six years following the closing of the merger with respect to acts or omissions occurring prior to merger.
Dissenters’ Rights (see page 49)
Under South Carolina law, holders of HCSB common stock will be entitled to dissent from the merger and to obtain payment in cash of the fair value of his or her shares of HCSB common stock. Set forth below is a summary of the procedures that must be followed by the holders of HCSB common stock in order to exercise their dissenters’ rights. This summary is qualified in its entirety by reference to the text of the applicable South Carolina statutes, a copy of which is attached to this proxy statement/prospectus as Appendix B to this document.
A record holder of HCSB common stock who wishes to assert dissenters’ rights (i) must deliver to HCSB before the vote is taken on the merger agreement written notice of his or her intent to demand payment for his or her shares if the merger is effectuated, and (ii) must not vote his or her shares in favor of the merger agreement. If a shareholder notifies HCSB that he or she intends to dissent, a vote in favor of the merger agreement cast by the holder of a proxy solicited by HCSB shall not disqualify a shareholder from demanding payment for his shares. A shareholder who does not satisfy these requirements is not entitled to payment for his or her shares under the applicable South Carolina statutes.
If the merger is authorized at the HCSB special meeting, HCSB will deliver, no later than 10 days after the special meeting, a written dissenters’ notice to all HCSB shareholders who satisfied the two requirements set forth above. The written dissenters’ notice will state where the payment demand must be sent and where stock certificates must be deposited, will inform holders of uncertificated shares to what extent transfer of the shares is to be restricted after the payment demand is received, will supply a form for demanding payment that includes the date of the first announcement to news media or to shareholders of the terms of the proposed merger and requires that the person asserting dissenters’ rights certify whether or not he or she or, if he or she is a nominee asserting dissenters’ rights on behalf of a beneficial shareholder, the beneficial shareholder acquired beneficial ownership of the shares before that date, will set a date by which HCSB must receive the payment demand, which date will not be less than 30 or more than 60 days after the written dissenters’ notice is delivered, will set a date by which certificates for certificated shares must be deposited, which date will not be earlier than 20 days after the demand date, and will be accompanied by a copy of the applicable South Carolina statutes. A shareholder that sent a dissenters’ notice must demand payment, certify whether he or she (or the beneficial shareholder on whose behalf he or she is asserting dissenters’ rights) acquired the beneficial ownership of the shares before the date set forth in the dissenters’ notice, and deposit his or her certificates in accordance with the terms of the notice. A dissenting shareholder who does not comply substantially with the requirements that he or she demand payment and deposit his or her share certificates where required, each by the date set in the dissenters’ notice, is not entitled to payment for his or her shares under the applicable South Carolina statutes.
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As soon as the merger is consummated, or upon receipt of a payment demand, HCSB will pay to each dissenting shareholder who substantially complied with the requirements set forth above the amount HCSB estimates to be the fair value of his or her shares, plus accrued interest. The payment will be accompanied by HCSB’s balance sheet as of the end of a fiscal year ending not more than 16 months before the date of payment, an income statement for that year, a statement of changes in shareholders’ equity for that year, and the latest available interim financial statements, if any; a statement of HCSB’s estimate of the fair value of the shares and an explanation of how the fair value was calculated; an explanation of how the interest was calculated; a statement of the dissenter’s right to demand additional payment; and a copy of the applicable South Carolina statutes. If HCSB does not consummate the proposed merger within 60 days after the date set for demanding payment and depositing share certificates, HCSB, within the same 60 day period, shall return the deposited certificates and release the transfer restrictions imposed on the uncertificated shares. If the shareholder believes the amount paid or offered is less than fair value of his or her shares or that the interest due is calculated incorrectly, or HCSB fails to make payment or offer payment within 60 days after the date set for demanding payment, or if the merger is not consummated, HCSB fails to return the deposited certificates or release transfer restrictions imposed on uncertificated shares within 60 days after the date set for demanding payment, he or she may notify HCSB in writing of his or her own estimate of fair value of his shares and amount of interest due and demand payment of his or her estimate (less the payment already received) or reject HCSB’s offer and demand payment of the fair value of his or her shares and interest due. However, a dissenting shareholder waives his or her right to demand additional payment if he or she fails to notify HCSB of his or her demand in writing within 30 days after HCSB made or offered payment for his or her shares. If a demand for additional payment remains unsettled, HCSB will commence a court proceeding within 60 days after receiving the demand for additional payment and petition the court to determine the fair value of the shares and the accrued interest. If HCSB does not commence the proceeding within the 60 day period, HCSB shall pay each dissenter whose demand remains unsettled the amount demanded.
Exercise of dissenters’ rights by holders of HCSB common stock will result in the recognition of gain or loss, as the case may be, for federal income tax purposes.

Special Shareholders’ Meeting
Date, Time, and Place
The special meeting of shareholders of HCSB will be held on [•], 2017 at [•] a.m., at [•]. At the special meeting, HCSB shareholders will be asked to:

approve the Agreement and Plan of Merger between HCSB and United, pursuant to which HCSB will be merged with and into United;

approve, on a non-binding advisory basis, the compensation that certain executive officers of HCSB will receive under existing agreements or arrangements with HCSB in connection with the merger; and

approve the adjournment or postponement of the special meeting, if necessary or appropriate, including to solicit additional proxies to approve the merger agreement.
Holders of HCSB voting common stock will vote on all three proposals. Holders of HCSB non-voting common stock will vote only on the merger proposal.
Record Date and Shares Entitled to Vote
You are entitled to vote at the shareholders’ meeting if you owned shares of HCSB common stock on [•], 2017. As of this date, [•] shares of HCSB voting common stock were issued and outstanding and entitled to vote at the special meeting, and [•] shares of HCSB non-voting common stock were issued and outstanding and entitled to vote at the special meeting.
Support Agreements
All of the directors of HCSB have agreed to vote their shares in favor of the merger agreement; provided that such voting support agreements terminate in the event that the HCSB Board of Directors withdraws its recommendation in favor of the merger or approves or recommends an acquisition proposal
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from another party. As of the record date, HCSB’s directors own [•] shares, or [•]%, of outstanding HCSB voting common stock, and no shares of outstanding HCSB non-voting common stock.
Vote Required (see page 39)
As of the record date, [•] shares of HCSB voting common stock were issued and outstanding and [•] shares of HCSB non-voting common stock were issued and outstanding, each of which is entitled to one vote per share.
Approval of the merger agreement requires the affirmative vote of  (i) two-thirds of the issued and outstanding shares of HCSB voting common stock and (ii) a majority of the issued and outstanding shares of HCSB non-voting common stock. Your failure to vote your shares (including your failure to instruct your broker to vote your shares) or your abstaining from voting will have the same effect as a vote “AGAINST” the merger agreement. The HCSB Board of Directors has unanimously adopted and approved the merger agreement and unanimously recommends that HCSB shareholders vote “FOR” the approval of the merger agreement.
As referenced above, all of the directors of HCSB have agreed to vote their shares in favor of the merger agreement; provided that such voting support agreements terminate in the event that the HCSB Board of Directors withdraws its recommendation in favor of the merger or approves or recommends an acquisition proposal from another party. As of the record date, HCSB’s directors own [•] shares, or [•]%, of outstanding HCSB voting common stock, and no shares of outstanding HCSB non-voting common stock.
The approval, on a non-binding advisory basis, of the proposal regarding compensation that certain executive officers of HCSB will receive under existing agreements or arrangements with HCSB in connection with the merger requires that the number of votes cast at the special meeting, in person or by proxy, in favor of the proposal exceeds the number of votes cast against the proposal. The HCSB Board of Directors unanimously recommends that HCSB shareholders vote “FOR” the approval of the compensation payable under existing agreements that certain of its officers will receive from HCSB in connection with the merger.
Approval of the merger agreement and approval of the compensation payable under existing agreements that certain HCSB officers will receive in connection with the merger are subject to separate votes of the HCSB shareholders, and approval of the compensation is not a condition to completion of the merger.
The approval of the proposal to adjourn or postpone the special meeting, if necessary or appropriate, including to solicit additional proxies to approve the merger agreement requires that the number of votes cast at the special meeting, in person or by proxy, in favor of the proposal exceeds the number of votes cast against the proposal. The HCSB Board of Directors unanimously recommends that shareholders vote “FOR” this proposal.
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SUMMARY CONSOLIDATED FINANCIAL INFORMATION OF UNITED
We are providing the following information to help you analyze the financial aspects of the merger. The following tables set forth summary historical operations and financial condition data and summary performance, asset quality and other information of United at and for the periods indicated, which is derived from United’s historical consolidated financial statements. You should read this data in conjunction with United’s Consolidated Financial Statements and notes thereto incorporated herein by reference from United’s Annual Report on Form 10-K for the year ended December 31, 2016 and United’s quarterly report on Form 10-Q for the quarter ended March 31, 2017. Financial amounts as of and for the three months ended March 31, 2017 and 2016 are unaudited and are not necessarily indicative of the results of operations for the full year or any other interim period, and management of United believes that such amounts reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of its results of operations and financial position as of the dates and for the periods indicated. You should not assume the results of operations for past years and for the three months ended March 31, 2017 and 2016 indicate results for any future period. United’s “net operating income” is determined by methods other than in accordance with generally accepted accounting principles (“GAAP”). Please see the following “Non-GAAP Performance Measures Reconciliation” below for a reconciliation of the difference between United’s non-GAAP net operating income and its GAAP net income.
At or for the Three Months
Ended March 31,
For the Years Ended December 31,
2017
2016
2016
2015
2014
2013
2012
(in thousands, except per share data)
INCOME SUMMARY
Interest revenue
$ 90,958 $ 80,721 $ 335,020 $ 278,532 $ 248,432 $ 245,840 $ 265,977
Interest expense
7,404 5,769 25,236 21,109 25,551 27,682 37,909
Net interest revenue
83,554 74,592 309,784 257,423 222,881 218,158 228,068
Provision for credit losses
800 (200 ) (800 ) 3,700 8,500 65,500 62,500
Fee revenue
22,074 18,606 93,967 72,529 55,554 56,598 56,112
Total revenue
104,828 93,758 404,281 326,252 269,935 209,256 221,680
Expenses
62,826 57,885 241,289 211,238 162,865 174,304 186,774
Income before income tax expense
42,002 35,873 162,992 115,014 107,070 34,952 34,906
Income tax expense (benefit)
18,478 13,578 62,336 43,436 39,450 (238,188 ) 1,050
Net income
23,524 22,295 100,656 71,578 67,620 273,140 33,856
Preferred dividends
21 21 67 439 12,078 12,148
Net income available to common shareholders – GAAP
$ 23,524 $ 22,274 $ 100,635 $ 71,511 $ 67,181 $ 261,062 $ 21,708
Merger-related and other charges
2,054 2,653 8,122 17,995
Income tax benefit of merger-related and
other charges
(758 ) (1,004 ) (3,074 ) (6,388 )
Impairment of deferred tax asset on cancelled non-qualified stock
options
976
Release of disproportionate tax effect lodged in OCI
3,400
Net income available to common shareholders – operating (1)
$ 28,220 $ 23,923 $ 106,659 $ 83,118 $ 67,181 $ 261,062 $ 21,708
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At or for the Three Months
Ended March 31,
For the Years Ended December 31,
2017
2016
2016
2015
2014
2013
2012
(in thousands, except per share data)
PERFORMANCE MEASURES
Per common share:
Diluted net income – GAAP
$ .33 $ .31 $ 1.40 $ 1.09 $ 1.11 $ 4.44 $ .38
Diluted net income – operating (1)
.39 .33 1.48 1.27 1.11 4.44 .38
Cash dividends declared
.09 .07 .30 .22 .11
Book value
15.40 14.35 15.06 14.02 12.20 11.30 6.67
Tangible book value (3)
13.30 12.40 12.95 12.06 12.15 11.26 6.57
Key performance ratios:
Return on common equity – GAAP (2)
8.54 % 8.57 % 9.41 % 8.15 % 9.17 % 46.72 % 5.43 %
Return on common equity – operating (1)(2)
10.25 9.20 9.98 9.48 9.17 46.72 5.43
Return on tangible common equity – operating (1)(2)(3)
12.10 10.91 11.86 10.24 9.32 47.35 6.27
Return on assets – GAAP
.89 .93 1.00 .85 .91 3.86 .49
Return on assets – operating (1)
1.07 1.00 1.06 .98 .91 3.86 .49
Dividend payout ratio – GAAP
27.27 22.58 21.43 20.18 9.91
Dividend payout ratio – operating (1)
23.08 21.21 20.27 17.32 9.91
Net interest margin (fully taxable equivalent)
3.45 3.41 3.36 3.30 3.26 3.30 3.51
Efficiency ratio – GAAP
59.29 61.94 59.80 63.96 58.26 63.14 65.43
Efficiency ratio – operating (1)
57.35 59.10 57.78 58.51 58.26 63.14 65.43
Average equity to average assets
10.24 10.72 10.54 10.27 9.69 10.35 8.47
Average tangible equity to average assets (3)
8.96 9.41 9.21 9.74 9.67 10.31 8.38
Average tangible common equity to average assets (3)
8.96 9.32 9.19 9.66 9.60 7.55 5.54
Tangible common equity to risk-weighted assets (3)
12.07 12.77 11.84 12.82 13.82 13.17 8.26
ASSET QUALITY
Non-performing loans
$ 19,812 $ 22,419 $ 21,539 $ 22,653 $ 17,881 $ 26,819 $ 109,894
Foreclosed properties
5,060 5,163 7,949 4,883 1,726 4,221 18,264
Total non-performing assets (NPAs)
24,872 27,582 29,448 27,536 19,607 31,040 128,158
Allowance for loan losses
60,543 66,310 61,442 68,448 71,619 76,762 107,137
Net charge-offs
1,679 2,138 6,766 6,259 13,879 93,710 69,831
Allowance for loan losses to loans
.87 % 1.09 % .89 % 1.14 % 1.53 % 1.77 % 2.57 %
Net charge-offs to average loans
.10 .14 .11 .12 .31 2.22 1.69
NPAs to loans and foreclosed
properties
.36 .45 .43 .46 .42 .72 3.06
NPAs to total assets
.23 .28 .28 .29 .26 .42 1.88
AVERAGE BALANCES ($ in millions)
Loans
$ 6,904 $ 6,004 $ 6,413 $ 5,298 $ 4,450 $ 4,254 $ 4,166
Investment securities
2,822 2,718 2,691 2,368 2,274 2,190 2,089
Earning assets
9,872 8,876 9,257 7,834 6,880 6,649 6,547
Total assets
10,677 9,634 10,054 8,462 7,436 7,074 6,865
Deposits
8,592 7,947 8,177 7,055 6,228 6,027 5,885
Shareholders’ equity
1,093 1,033 1,059 869 720 732 582
Common shares – basic (thousands)
71,700 72,162 71,910 65,488 60,588 58,787 57,857
Common shares – diluted (thousands)
71,708 72,166 71,915 65,492 60,590 58,845 57,857
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At or for the Three Months
Ended March 31,
For the Years Ended December 31,
2017
2016
2016
2015
2014
2013
2012
(in thousands, except per share data)
AT PERIOD END ($ in millions)
Loans
$ 6,965 $ 6,106 $ 6,921 $ 5,995 $ 4,672 $ 4,329 $ 4,175
Investment securities
2,767 2,757 2,762 2,656 2,198 2,312 2,079
Total assets
10,732 9,781 10,709 9,616 7,558 7,424 6,801
Deposits
8,752 7,960 8,638 7,873 6,335 6,202 5,952
Shareholders’ equity
1,102 1,034 1,076 1,018 740 796 581
Common shares outstanding (thousands)
70,973 71,544 70,899 71,484 60,259 59,432 57,741
(1)
Excludes merger-related charges, a first quarter 2017 release of disproportionate tax effects lodged in OCI and first quarter 2017 branch closure charges, a 2016 deferred tax asset impairment charge related to cancelled non-qualified stock options and 2015 impairment losses on surplus bank property.
(2)
Net income available to common shareholders, which is net of preferred stock dividends, divided by average realized common equity, which excludes accumulated other comprehensive income (loss).
(3)
Excludes effect of acquisition related intangibles and associated amortization.
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Non-GAAP Performance Measures Reconciliation
This document and the documents incorporated by reference into this document include non-GAAP financial measures, which are performance measures determined by methods other than in accordance with GAAP. Such non-GAAP financial measures include, among others the following: taxable equivalent interest revenue, taxable equivalent net interest revenue, total operating revenue, operating expense, tangible book value per share, tangible common equity to assets and tangible common equity to risk-weighted assets. Management uses these non-GAAP financial measures because it believes they are useful for evaluating our operations and performance over periods of time, as well as in managing and evaluating our business and in discussions about our operations and performance. Management believes these non-GAAP financial measures provide users of our financial information with a meaningful measure for assessing our financial results and credit trends, as well as comparison to financial results for prior periods. These non-GAAP financial measures should not be considered as a substitute for operating results determined in accordance with GAAP and may not be comparable to other similarly titled financial measures used by other companies.
The following is a reconciliation of these operating performance measures to GAAP performance measures.
At or for the Three Months
Ended March 31,
For the Years Ended December 31,
2017
2016
2016
2015
2014
2013
2012
(in thousands, except per share data)
Expense reconciliation
Expenses (GAAP)
$ 62,826 $ 57,885 $ 241,289 $ 211,238 $ 162,865 $ 174,304 $ 186,774
Merger-related and other charges
(2,054 ) (2,653 ) (8,122 ) (17,995 )
Expenses – operating
$ 60,772 $ 55,232 $ 233,167 $ 193,243 $ 162,865 $ 174,304 $ 186,774
Net income reconciliation
Net income (GAAP)
$ 23,524 $ 22,295 $ 100,656 $ 71,578 $ 67,620 $ 273,140 $ 33,856
Merger-related and other charges
2,054 2,653 8,122 17,995
Income tax benefit of merger-related and other charges
(758 ) (1,004 ) (3,074 ) (6,388 )
Impairment of deferred tax asset on cancelled non-qualified stock options
976
Release of disproportionate tax effects lodged in
OCI
3,400
Net income – operating
$ 28,220 $ 23,944 $ 106,680 $ 83,185 $ 67,620 $ 273,140 $ 33,856
Net income available to common shareholders reconciliation
Net income available to common shareholders (GAAP)
$ 23,524 $ 22,274 $ 100,635 $ 71,511 $ 67,181 $ 261,062 $ 21,708
Merger-related and other charges
2,054 2,653 8,122 17,995
Income tax benefit of merger-related and other charges
(758 ) (1,004 ) (3,074 ) (6,388 )
Impairment of deferred tax asset on cancelled non-qualified stockoptions
976
Release of disproportionate tax effects lodged in
OCI
3,400
Net income available to common shareholders – operating
$ 28,220 $ 23,923 $ 106,659 $ 83,118 $ 67,181 $ 261,062 $ 21,708
Diluted income per common share reconciliation
Diluted income per common share (GAAP)
$ .33 $ .31 $ 1.40 $ 1.09 $ 1.11 $ 4.44 $ .38
Merger-related and other charges
.01 .02 .07 .18
Impairment of deferred tax asset on cancelled non-qualified stock options
.01
Release of disproportionate tax effects lodged in
OCI
.05
Diluted income per common share – operating
$ .39 $ .33 $ 1.48 $ 1.27 $ 1.11 $ 4.44 $ .38
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At or for the Three Months
Ended March 31,
For the Years Ended December 31,
2017
2016
2016
2015
2014
2013
2012
(in thousands, except per share data)
Book value per common share reconciliation
Book value per common share (GAAP)
$ 15.40 $ 14.35 $ 15.06 $ 14.02 $ 12.20 $ 11.30 $ 6.67
Effect on goodwill and other intangibles
(2.10 ) (1.95 ) (2.11 ) (1.96 ) (.05 ) (.04 ) (.10 )
Tangible book value per common share
$ 13.30 $ 12.40 $ 12.95 $ 12.06 $ 12.15 $ 11.26 $ 6.57
Return on tangible common equity reconciliation
Return on common equity (GAAP)
8.54 % 8.57 % 9.41 % 8.15 % 9.17 % 46.72 % 5.43 %
Merger-related and other charges
.47 .63 .48 1.33
Impairment of deferred tax asset on cancelled non-qualified stock options
.09
Release of disproportionate tax effects lodged in
OCI
1.24
Return on common equity – operating
10.25 9.20 9.98 9.48 9.17 46.72 5.43
Effect on goodwill and other intangibles
1.85 1.71 1.88 .76 .15 .63 .84
Return on tangible common equity – operating
12.10 % 10.91 % 11.86 % 10.24 % 9.32 % 47.35 % 6.27 %
Return on assets reconciliation
Return on assets (GAAP)
.89 % .93 % 1.00 % .85 % .91 % 3.86 % .49 %
Merger-related and other charges
.05 .07 .05 .13
Impairment of deferred tax asset on cancelled non-qualified stock options
.01
Release of disproportionate tax effects lodged in
OCI
.13
Return on assets – operating
1.07 % 1.00 % 1.06 % .98 % .91 % 3.86 % .49 %
Dividend payout ratio reconciliation
Dividend payout ratio (GAAP)
27.27 % 22.58 % 21.43 % 20.18 % 9.91 % % %
Merger-related and other charges
(.98 ) (1.37 ) (1.02 ) (2.86 )
Impairment of deferred tax asset on cancelled non-qualified stock options
(.14 )
Release of disproportionate tax effects lodged in
OCI
(3.21 )
Dividend payout ratio – operating
23.08 % 21.21 % 20.27 % 17.32 % 9.91 % % %
Efficiency ratio reconciliation
Efficiency ratio (GAAP)
59.29 % 61.94 % 59.80 % 63.96 % 58.26 % 63.14 % 65.43 %
Merger-related and other charges
(1.94 ) (2.84 ) (2.02 ) (5.45 )
Efficiency ratio – operating
57.35 % 59.10 % 57.78 % 58.51 % 58.26 % 63.14 % 65.43 %
Average equity to assets reconciliation
Equity to assets (GAAP)
10.24 % 10.72 % 10.54 % 10.27 % 9.69 % 10.35 % 8.47 %
Effect of goodwill and other intangibles
(1.28 ) (1.31 ) (1.33 ) (.53 ) (.02 ) (.04 ) (.09 )
Tangible equity to assets
8.96 9.41 9.21 9.74 9.67 10.31 8.38
Effect of preferred equity
(.09 ) (.02 ) (.08 ) (.07 ) (2.76 ) (2.84 )
Tangible common equity to assets
8.96 % 9.32 % 9.19 % 9.66 % 9.60 % 7.55 % 5.54 %
Tangible common equity to risk-weighted assets reconciliation
Tier 1 capital ratio (Regulatory)
11.46 % 11.32 % 11.23 % 11.45 % 12.06 % 12.74 % 14.16 %
Effect of other comprehensive income
(.24 ) (.25 ) (.34 ) (.38 ) (.35 ) (.39 ) (.51 )
Effect of deferred tax limitation
1.13 1.85 1.26 2.05 3.11 4.26
Effect of trust preferred
(.25 ) (.08 ) (.25 ) (.08 ) (1.00 ) (1.04 ) (1.15 )
Effect of preferred equity
(.15 ) (2.39 ) (4.24 )
Basel III intangibles transition adjustment
(.03 ) (.07 ) (.06 ) (.10 )
Basel III disallowed investments
.03
Tangible common equity to risk-weighted assets
12.07 % 12.77 % 11.84 % 12.82 % 13.82 % 13.18 % 8.26 %
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SUMMARY CONSOLIDATED FINANCIAL INFORMATION OF HCSB
We are providing the following information to help you analyze the financial aspects of the merger. The following tables set forth summary historical operations and financial condition data and summary performance, asset quality and other information of HCSB at and for the periods indicated, which is derived from HCSB’s historical consolidated financial statements. You should read this data in conjunction with HCSB’s Consolidated Financial Statements and notes thereto incorporated herein by reference from HCSB’s Annual Report on Form 10-K, as amended on Form 10-K/A, for the year ended December 31, 2016 and HCSB’s quarterly report on Form 10-Q for the quarter ended March 31, 2017. Financial amounts as of and for the three months ended March 31, 2017 and 2016 are unaudited and are not necessarily indicative of the results of operations for the full year or any other interim period, and management of HCSB believes that such amounts reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of its results of operations and financial position as of the dates and for the periods indicated. You should not assume the results of operations for past years and for the three months ended March 31, 2017 and 2016 indicate results for any future period.
At and for the Three Months
Ended March 31,
At and for the Years Ended December 31,
2017
2016
2016
2015
2014
2013
2012
(in thousands, except share and per share data)
STATEMENTS OF INCOME
Interest income
$ 3,259 $ 2,989 $ 12,368 $ 13,726 $ 16,095 $ 17,071 $ 20,371
Interest expense
637 1,046 2,972 4,454 5,054 5,301 6,261
Net interest income
2,622 1,943 9,396 9,272 11,041 11,770 14,110
Provision for loan losses
1,424 3,923 1,061 (1,497 ) 10,530
Net interest income after provision
for loan losses
2,622 519 5,473 9,272 9,980 13,267 3,580
Noninterest income
413 416 20,614 3,135 3,556 3,956 4,574
Noninterest expense
2,742 4,218 19,231 12,626 13,749 15,460 17,681
Net income (loss) before provision
for income taxes
293 (3,283 ) 6,856 (219 ) (213 ) 1,763 (9,527 )
Provision for income taxes
610 27 78
Net income (loss) before provision
(benefit) for income taxes
293 (3,283 ) 6,246 (246 ) (291 ) 1,763 (9,527 )
Preferred dividends and accretion of preferred shares
(398 ) (1,512 ) (1,112 ) (852 ) (869 )
Gain on redemption of preferred shares
13,778
Net income (loss) available to common shareholders
$ 293 $ (3,681 ) $ 20,024 $ (1,758 ) $ (1,403 ) $ 911 $ (10,396 )
COMMON AND PER SHARE DATA
Net income (loss) per common share:
Basic
$ 0.00 $ (0.96 ) $ 0.07 $ (0.46 ) $ (0.37 ) $ 0.24 $ (2.78 )
Diluted
0.00 (0.96 ) 0.07 (0.46 ) (0.37 ) 0.24 (2.78 )
Cash dividends declared per common
share
Book value per common share
0.07 (7.16 ) 0.07 (6.54 ) (6.33 ) (7.83 ) (6.53 )
Outstanding common shares
495,763,940 3,846,340 495,763,940 3,846,340 3,816,340 3,738,337 3,738,337
Weighted average basic common shares
468,013,940 3,846,340 301,460,946 3,823,244 3,770,355 3,738,337 3,738,337
Weighted average diluted common shares
469,054,565 3,846,340 307,252,250 3,823,244 3,770,355 3,738,337 3,738,337
Dividend payout ratio
n/a % n/a % n/a % n/a % n/a % n/a % n/a %
PERIOD-END BALANCES
Total assets
$ 384,014 $ 363,363 $ 375,934 $ 361,423 $ 421,447 $ 434,586 $ 468,996
Investment securities available for sale, at fair value
104,341 83,205 106,529 89,701 106,674 94,602 77,320
Total loans, including loans held for sale
229,033 199,635 215,112 209,367 235,543 256,424 302,234
Deposits
322,339 335,461 313,269 330,831 391,337 406,044 435,861
Federal Home Loan Bank
advances
24,000 17,000 24,000 17,000 17,000 22,000 22,000
Shareholders’ equity
36,112 (14,648 ) 35,327 (12,250 ) (11,247 ) (16,442 ) (11,762 )
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At and for the Three Months
Ended March 31,
At and for the Years Ended December 31,
2017
2016
2016
2015
2014
2013
2012
(in thousands, except share and per share data)
AVERAGE BALANCES
Total assets
$ 376,161 $ 360,123 $ 377,660 $ 400,538 $ 444,720 $ 459,000 $ 521,205
Interest-earning assets
346,097 319,395 342,258 352,035 392,985 401,946 477,476
Investment securities available for sale, at fair value
105,773 86,902 92,970 95,602 112,679 81,560 94,901
Total loans, including loans held for sale
218,316 205,314 205,048 226,365 249,358 280,208 337,445
Deposits
313,697 329,345 324,256 369,744 411,911 425,760 475,998
Federal Home Loan Bank
advances
24,000 17,000 18,186 17,000 21,685 22,000 22,000
Other borrowings
17,248 6,247 18,338 18,360 19,375 24,475
Shareholders’ equity
35,756 (11,856 ) 24,577 (11,234 ) (12,850 ) (12,435 ) (5,093 )
SELECT PERFORMANCE RATIOS
Return on average assets
0.32 % (3.57 )% 1.65 % (0.06 )% (0.07 )% 0.38 % (1.83 )%
Return on average shareholders’ equity
3.33 n/a 25.41 n/a n/a n/a n/a
Net interest margin
3.08 2.45 2.75 2.63 2.81 2.93 2.96
CAPITAL RATIOS
Average shareholders’ equity as a percentage of average assets
9.51 % (3.29 )% 6.51 % (2.80 )% (2.89 )% (2.71 )% (0.98 )%
Shareholders’ equity as a percentage of assets
9.40 (4.03 ) 9.40 (3.39 ) (2.67 ) (3.78 ) (2.51 )
Tier 1 risk-based capital
15.02 (5.97 ) 15.54 (4.15 ) (3.61 ) (3.19 ) (3.44 )
Total risk-based capital
16.27 (5.97 ) 16.80 (4.15 ) (3.61 ) (3.19 ) (3.44 )
Tier 1 leverage
10.29 (3.86 ) 10.15 (2.87 ) (2.36 ) (2.23 ) (2.34 )
ASSET QUALITY INFORMATION
Allowance for loan losses
$ 3,717 $ 3,719 $ 3,750 $ 4,601 $ 5,787 $ 9,443 $ 14,150
Nonaccrual loans
1,915 6,115 2,025 8,742 11,661 10,631 22,567
Nonperforming assets
4,532 17,385 4,912 22,366 31,332 35,603 42,188
Loans 90 days past due and still accruing interest
170 157
Net loans charged-off
33 2,306 4,774 1,186 4,717 3,210 17,558
Allowance for loan losses as a percentage of gross loans
1.62 % 1.86 % 1.74 % 2.20 % 2.46 % 3.68 % 4.68 %
Nonaccrual loans and loans 90 days
past due and still accruing interest
as a percentage of gross loans
0.84 3.06 0.94 4.18 5.02 4.15 7.52
Nonperforming assets and loans
90 days past due and still accruing
interest as a percentage of total
assets
1.18 4.78 1.31 6.19 7.43 8.19 9.00
Net loans charged-off as a percentage
of average gross loans
0.06 4.32 2.33 0.52 1.89 1.15 5.20
OTHER DATA
Number of full-service branches
8 8 8 8 11 11 11
Number of full-time equivalent teammates
80 89 81 90 105 104 111
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COMPARATIVE PER COMMON SHARE DATA
The following table shows per common share data regarding basic and diluted earnings, cash dividends and book value for (i) United and HCSB on a historical basis, (ii) United and HCSB on a pro forma combined basis, and (iii) HCSB on a pro forma equivalent basis. The pro forma information has been derived from and should be read in conjunction with United’s and HCSB’s audited consolidated financial statements for the year ended December 31, 2016 and United’s and HCSB’s unaudited consolidated financial statements for the quarter ended March 31, 2017 incorporated herein by reference. This information is presented for illustrative purposes only. You should not rely on the pro forma combined or pro forma equivalent amounts as they are not necessarily indicative of the operating results or financial position that would have occurred if the merger had been completed as of the dates indicated, nor are they necessarily indicative of the future operating results or financial position of the combined company. The pro forma information, although helpful in illustrating the financial characteristics of the combined company under one set of assumptions, does not reflect the benefits of expected cost savings, opportunities to earn additional revenue, the impact of restructuring and merger-related costs, or other factors that may result as a consequence of the merger and, accordingly, does not attempt to predict or suggest future results.
Unaudited Comparative Per Common Share Data
United
HCSB
United
Pro Forma
Combined
HCSB
Pro Forma
Equivalent
Per Share (1)
Basic Earnings
Year ended December 31, 2016
$ 1.40 $ .07 $ 1.64 $ .01
Three months ended March 31, 2017
$ .33 $ .00 $ .32 $ .00
Diluted Earnings
Year ended December 31, 2016
$ 1.40 $ .07 $ 1.64 $ .01
Three months ended March 31, 2017
$ .33 $ .00 $ .32 $ .00
Cash Dividends Declared (2)
Year ended December 31, 2016
$ .30 $ .00 $ .30 $ .00
Three months ended March 31, 2017
$ .09 $ .00 $ .09 $ .00
Book Value
December 31, 2016
$ 15.06 $ .07 $ 15.04 $ .08
March 31, 2017
$ 15.40 $ .07 $ 15.37 $ .08
(1)
Computed by multiplying the United pro forma combined amounts by the exchange ratio of 0.0050.
(2)
United pro forma combined cash dividends paid are based only upon United’s historical amounts.
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RISK FACTORS
In addition to the other information, including risk factors, incorporated by reference herein from United ’s Annual Report on Form 10-K for the year ended December 31, 2016, you should carefully read and consider the following factors in evaluating the merger.
Because the market price of United common stock will fluctuate, HCSB shareholders cannot be sure of the value of the merger consideration they will receive.
Upon completion of the merger, each share of HCSB common stock will be converted into the merger consideration consisting of shares of United common stock. The market value of the merger consideration received by HCSB shareholders will vary with the price of United’s common stock, and there will be no adjustment to the merger consideration for changes in the market price of either shares of United common stock or shares of HCSB common stock. United’s stock price changes daily as a result of a variety of other factors in addition to the business and relative prospects of United, including general market and economic conditions, industry trends, and the regulatory environment. These factors are beyond United’s control. Therefore, at the time of the special meeting, holders of HCSB common stock will not know the precise market value of the consideration they will receive at the effective time of the merger. Shareholders should obtain current market quotations for shares of United common stock and for shares of HCSB common stock.
HCSB’s officers and directors have interests in the merger in addition to or different from the interests that they share with you as a HCSB shareholder.
Some of HCSB’s executive officers participated in negotiations of the merger agreement with United, and the HCSB Board of Directors approved the merger agreement and is recommending that HCSB shareholders vote for the merger agreement. In considering these facts and the other information contained in these materials, you should be aware that certain of HCSB’s executive officers and directors have economic interests in the merger that are different from or in addition to the interests that they share with you as a HCSB shareholder. These interests include, upon the completion of the merger, the payment of certain amounts to Jan H. Hollar, J. Rick Patterson, and W. Jack McElveen under existing employment agreements and the acceleration of vesting of outstanding HCSB restricted common stock held by these executive officers and other HCSB employees. See “Proposal No.1 — The Merger — Interests of the Directors and Officers of HCSB in the Merger” on page 42.
United may be unable to successfully integrate Horry County State Bank’s operations and retain its key employees.
The merger involves the integration of two companies that previously operated independently. The difficulties of combining the companies’ operations include integrating personnel, departments, systems, operating procedures and information technologies and retaining key employees. Failures in integrating operations or the loss of key personnel could have a material adverse effect on the business and results of operations of the combined company.
Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or cannot be met.
Before the transactions contemplated by the merger agreement, including the merger and the bank merger, may be completed, various approvals must be obtained from bank regulatory authorities. These governmental entities may impose conditions on the granting of such approvals. Such conditions or changes and the process of obtaining regulatory approvals could have the effect of delaying completion of the merger or of imposing additional costs or limitations on United following the merger. The regulatory approvals may not be received at all, may not be received in a timely fashion, and may contain conditions on the completion of the merger that are not anticipated or cannot be met. If the consummation of the merger is delayed, including by a delay in receipt of necessary governmental approvals, the business, financial condition and results of operations of each company may also be materially adversely affected.
If the merger is not completed, United common stock and HCSB common stock could be materially adversely affected.
The merger is subject to customary conditions to closing, including the approval of the HCSB shareholders. In addition, United and HCSB may terminate the merger agreement under certain
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circumstances. If United and HCSB do not complete the merger, the market price of United common stock or HCSB common stock may fluctuate to the extent that the current market prices of those shares reflect a market assumption that the merger will be completed. Further, whether or not the merger is completed, United and HCSB will also be obligated to pay certain investment banking, legal and accounting fees and related expenses in connection with the merger, which could negatively impact results of operations when incurred. In addition, neither company would realize any of the expected benefits of having completed the merger. If the merger is not completed, United and HCSB cannot assure their respective shareholders that additional risks will not materialize or not materially adversely affect the business, results of operations and stock prices of United and HCSB.
The termination fee contained in the merger agreement may discourage other companies from trying to acquire HCSB.
HCSB has agreed to pay a termination fee of  $2.0 million to United if, under certain circumstances, the merger agreement is terminated and, at the time of termination, a competing offer is outstanding or such offer has been accepted by HCSB. This fee could discourage other companies from trying to acquire HCSB.
HCSB shareholders will have a reduced ownership and voting interest after the merger and will exercise less influence over management.
HCSB shareholders currently have the right to vote in the election of the HCSB Board of Directors and on other matters affecting HCSB. Upon the completion of the merger, each HCSB shareholder receiving shares of United common stock in accordance with the merger agreement will be a shareholder of United with a percentage ownership of United that is smaller than such shareholder’s current percentage ownership of HCSB. It is currently expected that the former shareholders of HCSB as a group will receive shares in the merger constituting approximately [•]% of the outstanding shares of United’s common stock immediately after the merger. Because of this, HCSB shareholders will have less influence on the management and policies of United than they now have on the management and policies of HCSB.
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PROPOSAL NO. 1 — THE MERGER
Background of the Merger
Following the recapitalization of HCSB in April 2016, as part of its ongoing consideration and evaluation of its long-term prospects and strategies, the HCSB Board of Directors and senior management have regularly reviewed and assessed its business strategies and objectives, all with the goal of enhancing long-term value for its shareholders. The HCSB Board of Directors’ reviews and assessments have included discussions regarding strategic alternatives, including capital planning, efforts to improve earnings (such as revenue increases and expense reductions), and growth strategies (such as organic growth and mergers and acquisitions). The HCSB Board of Directors conducted strategic planning meetings that have included the use of outside advisors who have provided reviews of factors influencing the financial institutions industry generally and HCSB in particular (including the economic, interest rate and regulatory environment); the competitive landscape of community banking participants in South Carolina, the Southeast region and nationally; public trading prices of financial institution stocks; and financial institution merger and acquisition activity and valuations. These strategic planning meetings have included discussions regarding potential business considerations, economies of scale, increased client service, and shareholder value benefits that might be achieved if HCSB were to become a larger institution through acquisitions or a merger with a larger financial institution.
The HCSB Board of Directors and HCSB’s executive officers have also been contacted from time to time by various investment bankers and financial institutions, including United, who expressed a general interest in exploring strategic alternatives in the event that HCSB were to seek a merger partner. These contacts occurred through impromptu meetings at investor conferences and financial institutions industry conferences and other informal meetings and telephone calls. These meetings and the other inquiries that had been received from various institutions involved general discussions regarding a potential merger but did not involve specific proposed transaction terms.
On July 12, 2016, Jan Hollar, the Chief Executive Officer of HCSB, and Lynn Harton, the President and Chief Operating Officer of United, met to discuss, among other things, their prior experiences with financial institutions business combinations and, in particular, Mr. Harton’s past experience with acquiring distressed financial institutions. Ms. Hollar and Mr. Harton were familiar with one another as a result of previous business relationships and, specifically, United’s investment in HCSB as part of HCSB’s private placement transaction that was consummated in April 2016.
On October 21, 2016, an executive officer of a financial institution (referred to herein as “Institution A”) contacted Ms. Hollar to express Institution A’s interest in pursuing strategic alternatives with HCSB. Ms. Hollar agreed to meet with the Institution A executive, and the parties met on November 18, 2016 in Myrtle Beach, South Carolina to discuss HCSB, Institution A and the financial institutions industry in general. At the conclusion of the meeting, the Institution A executive informed Ms. Hollar that Institution A’s investment banker would contact her.
On November 28, 2016, Institution A’s investment banker contacted Ms. Hollar and stated that Institution A had an interest in exploring a business combination with HCSB.
On November 29, 2016, the HCSB Board of Directors met by telephone, and HCSB’s outside legal counsel, Nelson Mullins Riley & Scarborough, LLP (“Nelson Mullins”), also participated in the meeting. At this meeting, Ms. Hollar informed the HCSB Board of Directors that she had been contacted by Institution A and its investment banker about Institution A’s interest in exploring a business combination with HCSB. Ms. Hollar also informed the HCSB Board of Directors that she had previously held conversations with executives from two other institutions, one of which was United, who had expressed interest in discussing a business combination when HCSB concluded the time was right. She further indicated that, should the HCSB Board of Directors decide to explore strategic alternatives, HCSB’s investment banker, Hovde Group, LLC (“Hovde”), recommended expanding the pool of potential strategic partners to obtain a better indication of HCSB’s value. During this meeting, Nelson Mullins discussed the fiduciary duties of the HCSB Board of Directors in connection with business combination transactions. Finally, Ms. Hollar sought guidance from the HCSB Board of Directors on whether to proceed with further discussions with any potential business combination partners. After discussion, the HCSB Board of
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Directors unanimously authorized management and Hovde to explore business combination opportunities with suitable candidates.
On December 9, 2016, Ms. Hollar met with Mr. Harton in Greenville, South Carolina, and Mr. Harton expressed United’s interest in exploring a potential business combination with HCSB. On December 13, 2016, Mr. Harton and Ms. Hollar spoke again by phone to discuss United’s interest in conducting due diligence on HCSB for purposes of pursuing a potential business combination with HCSB.
At its regularly scheduled meeting on December 15, 2016, the HCSB Board of Directors discussed the status of the search for potential business combination partners. Ms. Hollar reported that, with Hovde’s assistance, management had identified eight institutions, including United and Institution A, that management believed would be attractive potential business combination partners, taking into account the institution’s likely interest in HCSB, ability and willingness to offer an attractive share price, current regulatory standing, current merger and acquisition activity, and likely timing for a transaction.
This list of potential business combination partners included United, Institution A, and six other financial institutions, all of which Ms. Hollar or Hovde had had general conversations with since the last meeting of the HCSB Board of Directors. Six of these eight financial institutions, including United and Institution A, expressed interest in being included if HCSB were to commence a formal process of searching for a business combination partner. Following Ms. Hollar’s report, the HCSB Board of Directors discussed the process and timing of a potential business combination and the pros and cons of proceeding at this time or waiting until a later date. After a thorough discussion, due to the existence of multiple interested financial institutions that the HCSB Board of Directors believed to be viable candidates to successfully execute a business combination, the HCSB Board of Directors unanimously authorized management to proceed with discussions with the six interested financial institutions.
At the regularly scheduled meeting of the HCSB Board of Directors on January 19, 2017, Ms. Hollar provided the HCSB Board of Directors with an update on the status of the search for a potential business combination partner, and the HCSB Board of Directors agreed formally to engage Hovde as its financial advisor for a potential business combination.
Over the next several weeks, HCSB or Hovde held discussions with each of the interested parties, and HCSB executed non-disclosure agreements with Institution A and United and began to provide each of them with due diligence materials. During February 2017, Hovde created an electronic data room containing the due diligence materials provided by HCSB, and United and Institution A were each granted access to the data room.
At its regularly scheduled board meeting on February 16, 2017, Ms. Hollar updated the HCSB Board of Directors on the status of the search for a potential business combination partner, including the on-going discussions with United and Institution A. Ms. Hollar informed the HCSB Board of Directors that the other four institutions were not in a position to continue discussions at this time due to their involvement in other matters. After discussion, the HCSB Board of Directors directed management to proceed with formal due diligence and negotiations with United and Institution A.
On February 21, 2017, Ms. Hollar and Rick Patterson, the Chief Operating Officer of HCSB, met in Greenville, South Carolina with Mr. Harton and Chris Zych, the Director of Mergers and Acquisitions and Management Reporting of United, to discuss due diligence and general matters associated with a potential business combination between the parties. Ms. Hollar and Mr. Patterson held a similar meeting on March 2, 2017 with executive officers of Institution A. Prior to these meetings, HCSB did not discuss specific proposed transaction terms with either United or Institution A.
On March 7, 2017, the HCSB Board of Directors met, together with Hovde and Nelson Mullins, to discuss the preliminary non-binding letters of intent that had been received from United and Institution A. United’s letter of intent proposed a fixed exchange ratio of 0.0050 shares of United common stock for each share of HCSB common stock. Based on the closing price of United common stock on March 6, 2017, this exchange ratio implied a price of  $0.1442 per share of HCSB common stock. Institution A’s letter of intent proposed a floating exchange ratio, leading to a fixed merger consideration of  $0.125 per share, consisting of 100% Institution A common stock.
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Hovde discussed the letters of intent with the HCSB Board of Directors, providing a comparison of the terms and the financial metrics of the two offers and a summary of the negotiations that had led to these offers. Hovde also advised the HCSB Board of Directors regarding selected precedent merger transactions and discussed HCSB’s prospects as an independent institution. This discussion included a review of HCSB’s earnings projections as an independent financial institution prepared by certain members of senior management of HCSB for the years ending December 31, 2017 through 2022 based on execution of HCSB’s current business strategy and Hovde’s net present value sensitivity analysis of HCSB’s estimated valuation based on such earnings projections. Hovde also reviewed each potential merger partner’s branch map, comparative loan and deposit composition, historical financial information, historical stock price performance, analyst estimates and recommendations, shareholder base, current peer trading multiples, management and board of directors, historical merger activity, market capitalization and stock trading volume and liquidity, potential merger financial impact, and transaction pricing or form of consideration mix sensitivity analysis. Hovde further discussed with the HCSB Board of Directors selected proposed nonfinancial terms (including the retention of HCSB officers, board representation, severance for HCSB employees and proposed timing of due diligence and signing of a definitive agreement), strategic fit, and integration factors (including each partner’s business model and strategy, primary operating market and senior management). Nelson Mullins also participated in the discussion and reviewed the fiduciary duties of the HCSB Board of Directors in connection with business combination transactions.
The HCSB Board of Directors then discussed the opportunities and risks associated with each of the two letters of intent, including the potential value of the merger consideration and the likelihood that a merger would ultimately be consummated on the terms reflected in the letters of intent. The HCSB Board of Directors discussed the opportunities and risks associated with HCSB remaining an independent institution, particularly in light of the potential continuing low interest rate environment, bank regulatory pressures and increasing compliance and other costs, the high level of competition from larger institutions and community banks in HCSB’s market, regulatory considerations, and variable economic conditions. The HCSB Board of Directors also discussed recent increases in financial institution merger and acquisition activity levels and valuations and the current trading prices of some of HCSB’s possible merger partners, which might enable such parties to execute a merger with HCSB on reasonably attractive financial terms.
Following this discussion, the HCSB Board of Directors unanimously determined to continue negotiations with United but asked Hovde to seek an increase in the merger consideration.
On March 9, 2017, the HCSB Board of Directors met again with representatives of Nelson Mullins to discuss the United offer. During this meeting, Ms. Hollar informed the HCSB Board of Directors that United was unwilling to increase its proposed merger consideration as it believed that its current offer represented the full value of HCSB. The HCSB Board of Directors reviewed the United proposal again and compared it against other alternatives, including remaining independent. The HCSB Board of Directors noted that there had been some recent trading in HCSB stock at prices materially higher than the implied value of United’s per share offer, including recent trades at $.38 per share. The HCSB Board of Directors noted, however, that the trading volume in HCSB’s stock was extremely light and sporadic, with an average daily trading volume since January 1, 2017 of less than .005% of the outstanding shares, and that the recent trading prices were not indicative of the actual value of HCSB common stock. Following this discussion, the HCSB Board of Directors unanimously approved the United letter of intent and authorized management to negotiate a definitive agreement with United.
Over the next several weeks, HCSB and United and their respective advisers engaged in additional due diligence (including HCSB performing “reverse” due diligence on United which included, among other actions, meetings of the HCSB management team with members of United’s management team and reviews of analyst reports) and negotiated the terms of the merger agreement and the related ancillary agreements.
On April 10 2017, the HCSB Board of Directors held a meeting, with Hovde and Nelson Mullins participating, to review a near-final draft of the merger agreement and to discuss the reverse due diligence findings. Hovde rendered its oral opinion, subsequently confirmed in writing, that, as of April 10, 2017 and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken as set forth in its opinion, the proposed merger consideration was fair, from a financial point of view, to the HCSB shareholders. Ms. Hollar reported that United was still completing its
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diligence on HCSB, which she anticipated would be finalized within the next seven to ten days but which she did not believe would result in any proposed changes to the merger terms. After further discussion, the HCSB Board of Directors unanimously approved the merger agreement and authorized Ms. Hollar to execute the agreement on behalf of HCSB upon completion of United’s diligence review. On April 18, 2017, United completed its final diligence review, with no changes proposed to the merger terms.
The merger agreement was entered into on April 19, 2017. On the morning of April 20, 2017, HCSB and United issued a joint news release publicly announcing the merger agreement.
United’s Reasons for the Merger
United’s board of directors believes that the completion of the merger presents a unique opportunity for United to further its growth strategy in coastal South Carolina. The terms of the merger, including the merger consideration, are the result of arm’s-length negotiations between representatives of United and HCSB. In reaching its decision to approve the merger, United’s board of directors consulted with its legal advisors regarding the terms of the transaction and with management of United. In approving the entry into the merger agreement, United’s board of directors considered the following material factors:

HCSB’s strategic presence around the attractive Myrtle Beach market will further United’s strategic focused coastal South Carolina growth plan;

HCSB’s and United’s respective management teams share a common business vision and commitment to their respective clients, shareholders, employees and other constituencies;

The two companies have complementary service-focused business models;

United’s management believes that the merger will be accretive to United’s earnings per share in the first full year (excluding one-time charges) due to a combination of revenue synergies, cost efficiencies and other cost savings opportunities for the combined company; and

The merger is likely to provide an increase in shareholder value, including the benefits of a stronger strategic position.
United’s board of directors also considered potential risks associated with the merger in connection with its deliberations of the proposed transaction, including the challenges of integrating HCSB’s business, operations and workforce with those of United, the potential negative impact on United’s stock price and the need to obtain shareholder and regulatory approvals in order to complete the transaction.
United’s board of directors considered all of these factors as a whole and, on balance, United’s board of directors believes that the opportunities created by the merger to increase the value of United’s franchise more than offset any integration or other risks inherent in the merger.
The foregoing discussion of the information and factors considered by United’s board of directors is not exhaustive, but includes the material factors considered by United’s board of directors. In view of the wide variety of factors considered by United’s board of directors in connection with its evaluation of the merger and the complexity of these matters, United’s board of directors did not consider it practical to, nor did it attempt to, quantify, rank or otherwise assign relative weights to the specific factors that it considered in reaching its decision. In considering the factors described above, individual members of United’s board of directors may have given different weights to different factors.
On the basis of these considerations, United’s entry into the merger agreement was unanimously approved by United’s board of directors on April 13, 2017.
HCSB’s Reasons for the Merger and Recommendation of the HCSB Board of Directors
It should be noted that the explanation of the reasoning of the HCSB Board of Directors and certain information presented in this section is forward-looking in nature and should be read in light of the factors set forth in the section entitled “Special Note Regarding Forward-Looking Statements.”
In reaching its decision to approve the merger agreement and recommend that HCSB’s shareholders approve the merger agreement, in addition to relying on personal knowledge of HCSB, United and the banking industry, the HCSB Board of Directors consulted with outside financial and legal advisors,
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reviewed various financial data and due diligence information, and considered the views of HCSB’s Chief Executive Officer, who is also a director. After such consultation and review, and after considering HCSB’s future prospects as an independent company and its strategic alternatives, the HCSB Board of Directors concluded that the proposed merger with United was in the best interests of HCSB and its shareholders.
In evaluating the merger agreement and reaching its decision to approve the merger agreement and recommend that HCSB shareholders approve the merger agreement, the HCSB Board of Directors considered a number of factors, which it reviewed with its outside financial and legal advisors, including the following, which are not intended to be exhaustive and are not presented in any relative order of importance:

the length of time to sufficiently improve HCSB’s financial condition to enable the company to remove the valuation allowance on its deferred tax asset;

the fact that 100% of the HCSB shares of common stock will be converted into the right to receive United common stock in the merger, which will allow HCSB shareholders who desire to do so to participate substantially in the future performance of the combined HCSB and United business and the potential synergies resulting from the merger;

the greater liquidity in the trading market for United common stock relative to the trading market for HCSB common stock;

the current and prospective business and economic environment of the markets served by HCSB, including the competitive environment in HCSB’s markets, the pressure on net interest margins resulting from a low interest rate environment, the continuing consolidation of the financial services industry, the increased regulatory burdens on financial institutions and the uncertainties in the regulatory climate going forward, and the escalating need for investment in technology;

the regular quarterly cash dividend declared and historically paid by United on outstanding shares of its common stock;

the views of the HCSB Board of Directors with respect to other potential HCSB strategic alternatives, including remaining independent, competing for organic growth, pursuing other merger partners, making acquisitions or engaging in share repurchases;

the overall greater scale that will be achieved by the merger, which should better position the combined company for growth and profitability;

the business, earnings, operations, financial condition, management, prospects, capital levels, technology and asset quality of both HCSB and United, taking into account the results of HCSB’s due diligence of United;

the financial analysis prepared by Hovde, HCSB’s financial advisor, and the opinion delivered to the HCSB Board of Directors by Hovde, to the effect that, as of April 10, 2017 and based upon and subject to the assumptions, limitations, qualifications and conditions described in such opinion, the merger consideration was fair, from a financial point of view, to the HCSB shareholders;

the financial terms of recent business combinations in the financial services industry reviewed by the HCSB Board of Directors and a comparison of the multiples paid in such selected business combinations with the terms of the merger, including information that was included in the Hovde fairness opinion analysis that indicated that the merger consideration, as a percentage of adjusted tangible book value and as a multiple of earnings, was higher than the comparable nationwide transactions group median and the comparable Southeast transactions group median and the merger consideration represented a core deposit premium that was also higher than the comparable nationwide transactions group median and the comparable Southeast transactions group median;

the results of HCSB’s exploration of possible merger partners other than United, and the views of the HCSB Board of Directors with respect to the likelihood of any such other merger occurring and providing greater value to HCSB shareholders;
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the views of the HCSB Board of Directors with respect to the complementary aspects of the HCSB and United businesses, including customer focus, geographic coverage, business orientation and compatibility of the companies’ management and operating styles, which the HCSB Board of Directors believes should facilitate integration and enhance the likelihood of successful post-merger operations;

the belief of the HCSB Board of Directors that combining the two companies presents potential opportunities to realize operational, technological, marketing and other synergies resulting from the merger;

the HCSB Board of Directors’ understanding of United’s commitment to enhancing its strategic position in South Carolina and in the Southeast region;

the views of the HCSB Board of Directors as to the likelihood that the regulatory approvals necessary to complete the merger would be obtained;

the views of the HCSB Board of Directors as to the ability of United’s management team to successfully integrate and operate the business of the combined company after the merger;

the effect of the merger on HCSB’s officers and employees, including the prospects for continued employment and the severance and other benefits agreed to be provided by United to employees of HCSB; and

the fact that HCSB shareholders would be entitled to dissenters’ rights in connection with the merger.