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Four Oaks Fincorp, Inc. Announces 2017 Second Quarter Earnings

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Four Oaks Fincorp, Inc. (OTCQX:FOFN) (the "Company"), the holding
company for Four Oaks Bank & Trust Company (the "Bank"), today announced
earnings for the second quarter and six months ended June 30, 2017. The
Company reported net income of $1.3 million or $0.20 per diluted share
and $2.5 million or $0.38 per diluted share, respectively, for the
second quarter and six months ended June 30, 2017 compared to net income
of $872,000 or $0.13 per diluted share and $1.7 million or $0.26 per
diluted share for the same periods in 2016. The Company recorded income
tax expense of $702,000 and $1.4 million, respectively, for the three
and six months ended June 30, 2017, as compared to $498,000 and $961,000
for the same periods in 2016.

President and Chief Executive Officer David H. Rupp stated, "We are
pleased to announce another solid quarter at Four Oaks Bank. Obviously,
the big news of the quarter was our June 27th announcement of our
pending merger with United Community Bank of Blairsville, Georgia. We
are extremely excited to join a team that will allow us to deliver
better products and services to our customers while keeping our branches
and market teams in place. We expect the same bankers you have trusted
for years will continue to be at their branches, prepared to help you as
they always have."

Merger with United Community Banks, Inc.:

On June 27, 2017, the Company announced the execution of a definitive
merger agreement with United Community Banks, Inc. ("United") to acquire
the Company and the Bank in a stock and cash transaction. Under the
terms of the agreement the Company's shareholders will receive merger
consideration consisting of 0.6178 shares of United common stock and
$1.90 in cash for each share of the Company. The transaction has been
unanimously approved by the Board of Directors of each company and is
expected to close in the fourth quarter of 2017.

Second Quarter 2017 Highlights:

  • Definitive agreement with United to acquire the Company in a stock and
    cash transaction.
  • The Federal Reserve Bank of Richmond (the "FRB") announced termination
    of the Bank's 2015 Written Agreement with the FRB.
  • Net income growth of $451,000 or 51% compared to the second quarter
    2016 and $808,000 or 47% compared to the six months ended June 30,
    2016.
  • Demand, savings, and money market deposits increased $20.2 million
    compared to December 31, 2016 for an annualized growth rate of 11.4%.

Net Interest Margin and Net Interest Income:

Net interest margin annualized for the three and six months ended
June 30, 2017 was 3.83% and 3.90%, respectively, compared to 3.75% and
3.72% for the same periods in 2016. Net interest income totaled $6.4
million and $12.8 million for the three and six months ended June 30,
2017, respectively, as compared to $6.1 million and $12.0 million for
the same periods in 2016.

The primary driver of the improved margins and overall net interest
income for both periods was the increase in interest earned on loans and
the decrease in interest expense on time deposits offset by a decline in
interest earned on investment securities. These fluctuations were driven
primarily by changes in average balances as interest rates remained
fairly constant over both periods.

Non-Interest Income:

Non-interest income was $1.6 million and $3.0 million for the three and
six months ended June 30, 2017, respectively, as compared to $1.6
million and $2.7 million for the same periods in 2016. As the Company
reviewed options to increase fee income during 2016, it invested in a
new bank owned life insurance policy which has resulted in increased fee
income for the three and six months ended June 30, 2017 of $71,000 and
$126,000, respectively.

Other non-interest income increased $247,000 and $292,000 for the three
and six months ended June 30, 2017, respectively. This variance included
a gain of $195,000, which occurred during the second quarter of 2017
when the Company sold a former branch location. Offsetting these
increases was the absence of gains on the sale of investment securities
available for sale during the three and six months ended June 30, 2017,
resulting in decreases of $266,000 in both periods.

Non-Interest Expense:

Non-interest expense totaled $6.0 million and $11.9 million for the
three and six months ended June 30, 2017, respectively, as compared to
$6.3 million and $12.0 million for the same periods in 2016.

The Company has been focused on expense reductions and operational
efficiencies during 2017 and accordingly most categories of non-interest
expense declined for the three and six months ended June 30, 2017 as
compared to the preceding year. Of these, salaries and benefit related
expenses was a primary contributor declining $201,000 and $91,000 for
the three and six months ended June 30, 2017, respectively. These
declines were a result of reduced headcount and reductions in current
year incentive accruals offset by increased restricted stock expense.
Another primary contributor to the reduced expenses were declines in
professional and consulting fees of $230,000 and $200,000 for the
quarter and six months ended June 30, 2017. Additionally, collections
and foreclosure related expenses declined over both periods reflecting
stabilized asset quality and reductions in foreclosed assets.

Offsetting these declines were $524,000 of merger-related expenses for
three and six months ended June 30, 2017 that the Company incurred in
connection with the proposed merger with United.

Balance Sheet:

Total assets were $739.8 million at June 30, 2017 compared to $719.9
million at December 31, 2016, an increase of $19.9 million or 2.8%.
Cash, cash equivalents, and investments were $193.1 million at June 30,
2017 compared to $163.6 million at December 31, 2016, an increase of
$29.5 million or 18.0%. Outstanding gross loans declined to $497.8
million at June 30, 2017 compared to $507.0 million at December 31,
2016, a decrease of $9.2 million or 1.8%.

Total liabilities were $668.5 million at June 30, 2017, an increase of
$16.6 million or 2.6%, from $651.9 million at December 31, 2016. Total
deposits increased $6.7 million or 1.2% during the six month period
ended June 30, 2017, from $553.5 million at December 31, 2016, to $560.2
million at June 30, 2017.

As the Company's market teams continued to focus on demand, savings, and
money market account growth, this total increased $20.2 million or 5.7%
during the six month period ended June 30, 2017 totaling $372.4 million
compared to $352.2 million as of December 31, 2016. This growth was
offset by reductions in time deposits of $13.5 million or 6.7%, which
totaled $187.8 million as of June 30, 2017 compared to $201.3 million at
December 31, 2016. This decline in time deposits was a result of
reductions in brokered deposits of approximately $6.0 million coupled
with reduced retail time deposits. Long-term borrowings were $80.0
million at June 30, 2017 compared to $70.0 million at December 31, 2016,
an increase of $10.0 million or 14.3% due to the execution of an
additional advance during the first quarter of 2017. Total shareholders'
equity increased $3.3 million or 4.9%, from $68.0 million at
December 31, 2016, to $71.3 million at June 30, 2017.

Asset Quality:

Asset quality measures continue to trend positively as nonperforming
assets totaled $5.4 million or 0.73% of total assets at June 30, 2017
compared to $6.0 million or 0.84% of total assets at December 31, 2016.
The allowance for loan and lease losses remained constant at $9.6
million as of June 30, 2017 and December 31, 2016. The allowance for
loan and lease losses as a percentage of gross loans was 1.94% and 1.90%
at June 30, 2017 and December 31, 2016, respectively. The Company
reported a classified asset to capital ratio of 7.9% as of June 30, 2017
compared to 8.9% as of December 31, 2016.

Capital:

The Bank remains well capitalized at June 30, 2017 and reports total
risk based capital of 16.0%, Tier 1 risk based capital of 14.7%, a
leverage ratio of 11.3%, and common equity Tier 1 capital of 14.7%. At
December 31, 2016, the Bank had total risk based capital of 15.4%, Tier
1 risk based capital of 14.1%, a leverage ratio of 11.0%, and common
equity Tier 1 capital of 14.1%.

With $739.8 million in total assets as of June 30, 2017, the Company,
through its wholly-owned subsidiary, Four Oaks Bank & Trust Company,
offers a broad range of financial services through its fourteen offices
in Four Oaks, Clayton, Smithfield, Garner, Benson, Fuquay-Varina,
Wallace, Holly Springs, Zebulon, Dunn, Raleigh (LPO) and Apex (LPO),
North Carolina. Four Oaks Fincorp, Inc. trades through its market makers
under the symbol of FOFN.

All share and share related information presented in this press
release has been retroactively adjusted to reflect the decreased number
of shares resulting from the previously announced one for five reverse
stock split.
Information in this press release may contain
forward-looking statements.
These statements involve risks and
uncertainties that could cause actual results to differ materially,
including without limitation, (i) the possibility that expected benefits
of the proposed merger with United may not materialize in the time
frames expected or at all, or may be more costly to achieve; (ii) that
the proposed merger may not be timely completed, if at all; (iii) that
prior to completion of the proposed merger or thereafter, the parties'
respective businesses may not perform as expected due to
transaction-related uncertainties or other factors; (iv) that the
parties to the proposed merger are unable to implement successful
integration strategies; (v) that the required regulatory, shareholder,
or other closing conditions to the proposed merger are not satisfied in
a timely manner, or at all; (vi) reputational risks and the reaction of
the parties' customers to the proposed merger; (vii) diversion of
management time to merger-related issues; (viii) litigation or
regulatory actions related to the proposed merger; (ix) the failure of
assumptions underlying the establishment of the allowance for loan
losses; (x) the risks of changes in interest rates on the level and
composition of deposits: (xi) the effects of future economic conditions,
government fiscal and monetary policies, legislative and regulatory
changes; (xii) the effects of competition from other financial
institutions; and (xiii) and the low trading volume of the Company's
common stock.
Additional factors that could cause actual results
to differ materially are discussed in the Company's filings with the
Securities and Exchange Commission (the "SEC"), including without
limitation its Annual Report on Form 10-K, its Quarterly Reports on Form
10-Q, and its Current Reports on Form 8-K.
The Company does not
undertake a duty to update any forward-looking statements in this press
release.

Additional Information and Where to Find It

Investors and security holders are urged to carefully review and
consider each of United's and the Company's public filings with the SEC,
including but not limited to their Annual Reports on Form 10-K, their
proxy statements, their Current Reports on Form 8-K, and their Quarterly
Reports on Form 10-Q. The documents filed by United with the SEC may be
obtained free of charge at United's website at http://www.ucbi.com
or at the SEC's website at http://www.sec.gov.
These documents may also be obtained free of charge from United by
requesting them in writing to Investor Relations, United Community
Banks, Inc., 125 Highway 515 East, Blairsville, Georgia 30514-0398, or
by telephone to Investor Relations at (706) 781-2265. The documents
filed by the Company with the SEC may be obtained free of charge at the
Company's website at https://www.fouroaksbank.com,
or at the SEC's website at http://www.sec.gov.
These documents may also be obtained free of charge from the Company by
requesting them in writing to Four Oaks Fincorp, Inc., 6114 US Hwy 301
S, PO Box 309, Four Oaks, NC 27524 Attn: Corporate Secretary, or by
telephone to Corporate Secretary at (919) 963-2177.

United plans to file a registration statement on Form S-4 with the SEC
to register the shares of United's common stock that will be issued to
the Company's shareholders in connection with the proposed merger. The
registration statement will include a joint proxy statement of the
Company and prospectus of United and other relevant materials in
connection with the proposed merger. INVESTORS AND SECURITY HOLDERS ARE
URGED TO READ THE REGISTRATION STATEMENT AND JOINT PROXY
STATEMENT/PROSPECTUS WHEN IT BECOMES AVAILABLE AND ANY OTHER DOCUMENTS
FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED MERGER OR
INCORPORATED BY REFERENCE INTO THE REGISTRATION STATEMENT OR JOINT PROXY
STATEMENT/PROSPECTUS BECAUSE SUCH DOCUMENTS WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED MERGER. A definitive joint proxy
statement/prospectus will be sent to the shareholders of the Company
seeking the required shareholder approval. Investors and security
holders will be able to obtain the registration statement and the joint
proxy statement/prospectus free of charge from the SEC's website or from
United or the Company as described above.

This communication shall not constitute an offer to sell or the
solicitation of an offer to buy securities, nor shall there be any sale
of securities in any jurisdiction in which such offer, solicitation or
sale would be unlawful prior to registration or qualification under the
securities laws of such jurisdiction.

Participants in the Merger Solicitation

United, the Company, and certain of their respective directors and
executive officers may be deemed to be participants in the solicitation
of proxies from the Company's shareholders in connection with the
proposed merger. Information regarding the directors and executive
officers of United and their ownership of United common stock is set
forth in its 2016 Annual Report on Form 10-K, definitive proxy statement
for United's 2017 annual meeting of shareholders, as filed with the SEC
on March 24, 2017, and other documents subsequently filed by United with
the SEC. Information regarding the directors and executive officers of
the Company and their ownership of the Company's common stock is set
forth in its definitive proxy statement for the Company's 2017 annual
meeting of shareholders, as filed with the SEC on April 17, 2017, and
other documents subsequently filed by the Company with the SEC. Such
information will also be included in the registration statement and
joint proxy statement/prospectus for the Company's special meeting of
shareholders, which will be filed by United with the SEC. Additional
information regarding the interests of such participants will be
included in the registration statement and joint proxy
statement/prospectus and other relevant documents regarding the proposed
merger filed with the SEC when they become available. Free copies of
these documents may be obtained as described above.

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