Good morning, and welcome to United Community Banks’ First Quarter Conference Call. Hosting our call today are President and Chief Executive Officer, Jimmy Tallent; Chief Financial Officer, Rex Schuette; and Chief Risk Officer, David Shearrow. United’s presentation today includes references to core pre-tax, pre-credit earnings, operating earnings, and other non-GAAP financial information. For each of these non-GAAP financial measures, United has provided a reconciliation to GAAP in the financial highlights section of the news release and at the end of the investor presentation. Both are included on the website at ucbi.com. Copies of today’s earnings release and investor presentation for the first quarter were filed on Form 8-K with the SEC and a replay of this call will be available on the company’s Investor Relations page at ucbi.com. Please be aware that during this call, forward-looking statements may be made by United Community Banks. Any forward-looking statements should be considered in light of risks and uncertainties described on page 4 of the company’s Form 10-K and other information provided by the company in its filings with the SEC and included on its website. At this time, we will begin the conference call with Jimmy Tallent.

Good morning, everyone, and thank you for joining us for our earnings call. While we still have work ahead, we are pleased overall with the first quarter results. Our core pre-tax, pre-credit earnings were $29.3 million, up $2.6 million from the fourth quarter and at the highest level since the fourth quarter of 2009. Net income was $11.5 million or $0.15 per share. Two one-time revenue items increased net income by $1.8 million or $0.03 per share. Net charge-offs of $15.9 million slightly exceeded our $15 million provision for loan losses this quarter. OREO expenses were $3.8 million, down significantly from the $9.3 million in the fourth quarter, though still elevated by historical standards. We had our second consecutive quarter of loan growth with $169 million in new commitments, of which $131 million were funded by March 31. Core transaction deposits also grew by $151 million or 21% on an annualized basis. Non-interest-bearing demand deposits accounted for $108 million of this increase. That is encouraging, especially in light of new service fees that became effective January 1, 2012. Non-performing assets were $162 million or 2.3% of total assets at quarter end. Our net interest margin was 3.53%, and all of our capital ratios remained solid. Now, David will provide detail on our credit performance and Rex will follow with details of our financial results. David?

Thank you, Jimmy and good morning. This quarter, we provided $15 million for loan losses, up from $14 million in the fourth quarter. Net charge-offs were $15.9 million in the first quarter, down $30.1 million from last quarter. Our charge-offs were elevated last quarter due to the $25 million charge down of our largest loan relationship. Non-performing assets increased $1.3 million from $160.3 million last quarter to $161.6 million this quarter. Given the slow pace of OREO sales in the quarter, we were pleased that our NPAs were essentially flat this quarter due to a decline in NPL inflow. Non-performing assets included $129.7 million of non-performing loans and $31.9 million in foreclosed properties. The net inflow of new NPLs was $32.4 million this quarter compared to $46 million last quarter. We had no accruing loans that were past due 90 days or more. The ratio of non-performing assets to total assets was 2.25% compared to 2.3% last quarter. In addition, our performing classified loans decreased $11.5 million from $328.5 million to $317 million on a linked quarter basis. Accruing TDRs totaled $125.8 million and increased $19.8 million from last quarter. Most of the increase in TDRs occurred in CRE, commercial construction, and residential mortgage categories. 94% of accruing TDRs were classified substandard this quarter. In addition, 79% of our total TDRs remain on accrual, and 30:89 past dues for the accruing TDRs were 1.31% this quarter. The 30:89 day past due loans for the entire portfolio were 86 basis points, compared to 75 basis points last quarter. The market to sell foreclosed properties remained challenging in the quarter due to a large number of sellers in what remains a very soft market. We sold $8.6 million in foreclosed properties this quarter versus $20.7 million in the fourth quarter. Historically, the…

Thank you, David and good morning. My comments today will refer to pages within our investor presentation and the tables included in our earnings release. Core pre-tax, pre-credit earnings for the first quarter of 2012, as shown on Page 22 of the investor presentation, were $29.3 million and increased $2.6 million from last quarter and $7.2 million from a year ago. The increase from last quarter is due to a combination of higher fee revenue and lower operating expenses. Net interest revenue of $58.9 million was down slightly from last quarter, and up $458,000 from a year ago. There were a number of positive and negative items that affected our margin for the first quarter. As in the fourth quarter, prepayment acceleration lowered the yield on our investment securities portfolio due to a higher premium amortization, and the reinvestment yield on purchased securities was lower than the yield on securities they replaced. Also, competition on loans and pricing pressures lowered the yield on our loan portfolio this quarter. We’re able to more than offset these 2 negative factors by continuing to lower deposit pricing, which overall was 60 basis points for the first quarter and down 10 basis points from the fourth quarter of 2011. Additionally, we improved the yield on our short-term investments. Also, a more favorable mix of our non-interest bearing deposits contributed to lower the overall cost of funds. The increase in the yield on short-term investments was due to a change in composition. In the fourth quarter, we began entering into reverse repurchase agreements, including collateral swap transactions to enhance the yield on these excess funds. As a result, we’re able to increase the yield on short-term investments by 56 basis points from the fourth quarter of 2011. The most encouraging items affecting our margin this…

Thank you, Rex. Overall, I’m pleased with our first quarter’s results. We’ve now completed 4 quarters since the execution of our capital transaction and problem asset disposition plan, and 3 of the 4 quarters have been profitable. Profitability, going forward, is a trend we expect to continue. Getting to this point has not been easy and we’re still not where we need to be, but we are making progress. Our first quarter $18 million net increase in loans represents the first positive quarter-to-quarter growth since 2008. That’s a welcome turning point. Much of the growth was achieved by new lenders hired in the past 12 months and has been primarily in our focused areas of C&I and owner-occupied commercial real estate. We expect more growth, though we could see some volatility as we continue to work through both the weak economy and for the run-off in the construction loan portfolios. We have achieved steady and dependable net interest margin and strong core transaction deposit growth. Core transaction deposits now represent more than 52% of total customer deposits, 5 years ago, they were 34%. So, we’ve made tremendous strides in improving our customer deposit mix. Credit measures are also showing improvement with the inflow of new non-performing loans declining, net charge-offs and performing classified loans decreasing, and our allowance for loan losses remained strong at 2.75% of loans. The efforts I’ve mentioned to grow C&I and owner-occupied commercial real estate loans and our efforts to reduce construction loans have fundamentally and positively changed the composition of our loan portfolio. Five years ago, commercial and residential construction loans accounted for 43% of the portfolio compared to 15% today. We are moving in the right direction. During our last call, I mentioned an initiative to improve our core earnings run rate, which was…

[Operator Instructions] And our first question in queue comes from Jefferson Harralson with KBW. Your line is open.

I want to ask you about the -- kind of the opportunity cost of M&A and this is kind of a TARP repay questioning. On one hand, you can kind of raise now, pay off TARP, buy banks, maybe grow a little faster. On the other hand, you put out a lot of shares over time here. You could wait, have less dilution, but it might be hard to internally generate all the capital you need by 2014 to do so. But I’m not really – want to ask you exactly what you’re going to do, but just how you think about it.

Good morning, Jefferson, Rex. I think from the standpoint that we’ve talked about this in the last couple of calls with respect to repaying TARP, and I don’t think that position has changed at this time, I mean, we look at it in the context of dilution to our shareholders right now. We have a significant amount of DTA built up in regulatory capital that will come back to us. We’re making money this year. We have a dividend starting next year. And again, I think at this time, we still, without any other changes, would probably look to repay it over a period of time on an installment basis. Technically, you can pay back as minimum as 5% right now. So, they changed that requirement to be a lesser amount. I think in the context of weighing that currently and making that decision, Jefferson, and where we’re trading at a discount to what we call adjusted tangible book with the DTA put in it, it would make sense for our shareholders to raise equity right now in paying that back.

Okay, thank you. Our next question comes from Jeff Davis with Guggenheim Securities. Your line is open.

A couple of questions, one on the DTA. Whose ultimate decision is that, Rex, in terms of whether the allowances reverse back, whether all at once or partially? Is that management’s decision or is it the accountant’s decision or is it a collective decision? I realized we don’t have a lot of case law on how this works.

Yes, there is very little case law. Similar to just with the other institutions also, Jeff, it’s a collaborative. Our auditors have to be completely in sync with that decision to reverse the DTA allowance. And as we commented and I commented on the call just briefly ago in my remarks, we need to have a few more quarters of profitability and consistency in what we’re seeing. And again, the credit metrics are moving in the right direction. And we continue to talk with our auditors each quarter on that at the same time.

Yes, so, Rex, I assume you’re going to tell me there is no bright line in the decision process. Is it a decision that’s more likely to be made around year-end ’12 or year-end ’13 and less likely to be made midyear?

I wouldn’t say that necessarily. It could be between those 2 points that you mentioned. Again, I think as we continue with our profitability and continue our discussions with our auditors that will kind of frame its way out and show a clear path, I think, when we get there.

Okay. Just a few other questions, if I can keep going. If you got it back today, the $274 million, how much, roughly in just round numbers, roughly how much of that would count as regulatory capital at the bank level?

At the bank level, it probably would be in the $25 million or so, $25 million to $30 million of that total would come back immediately for regulatory capital. And then in the future you would pick up every quarter going forward basically, the forward 4 quarters. Going forward, you pick up another quarter as you continue. Earnings in the quarter would offset the first quarter and the forward quarters, and you pick up the subsequent, the fourth quarter, out again.

Okay. How much cash at the parent?

Cash at the parent is $63 million. Our debt service and run rate at the parent company is roughly around $18 million a year. So, we have probably 3 years of liquidity at the parent company. We do have one sub debt that matures in December of this year, and we’re actively pursuing that to look at financing that, refinancing that, with senior notes. And we’ll look at doing that sometime in the third quarter, either privately or through a retail note program.

I don’t have my parent-only balance sheet up in front of me. How much is that issue?

That’s $30.5 million.

Okay. This shouldn’t be a problem. And then last question and I’ll stop or get back in. David, you made the comment that other real estate sales are not expected to bounce back to what you saw in the fourth quarter, if I’m looking at this right, $21 million in the fourth quarter. What’s the -- and I know the first quarter is seasonally slow. Has something changed in the market that the pace is slower other than you’ve got less to sell than you used to have?

No, it’s really a function of, when you’re at, in our case, $30 million of inventory, hitting a $20 million mark…

Yes. Okay. I’m sorry. Yes, you’re right. I spoke too quickly.

Yes, that’s really the issue. So, the market is seasonably soft, typically in the first quarter. We will see a pickup in the next 2 quarters. But I think getting to $20 million, given our base, is going to be hard.

Has the market -- okay then forget about the amount you’re selling. Has the market fundamentally changed from a year ago? And maybe contrast that with, so let’s say, North Georgia, how is the real estate market versus spring of 2011? And same question, as it relates to metro Atlanta or MSA Atlanta?

Yes. I don’t know that it’s changed all that much. I think probably over past year, there had been further softening in land prices in North Georgia, more so than say Atlanta. I think Atlanta is a little bit firmer on the price point, whether it’s housing or land in Atlanta. Although there are some out counties in Atlanta that I think are -- I don’t know if they’re deteriorating further, but they’re still very soft. But, overall, I don’t think there’s a big difference between a year ago and this year. I think, it’s pretty similar, frankly. [Technical Difficulty]

Kevin Fitzsimmons from Sandler O’Neill. Your line is open.

My questions are credit-related, so I guess, David, these would be for you. But the first one is last week we saw development with -- in the Fletcher situation, where a judge ordered liquidation in the fund now. Does that mean anything for you all for that remaining credit piece from that relationship? I guess, it’s probably $70 million NPL at this point or does it not have any bearing, because you’ve written it down? It’s all based on the real state. That’s #1. And then #2, David if you could help us, how to look at the accruing TDRs, I mean on one hand, we’re seeing the continued slowing in NPL inflow, and that’s great. And we are seeing the performing classifieds come down, but the accruing TDRs, when will that growth on a linked-quarter basis start to subside or when will those peak. Because I think a lot of us, in not knowing really exactly how to treat that, we swapped in NPAs and it ends up kind of diluting some of the progress you guys are, at least optically, that you are showing in NPAs?

First, on the question with the news in the paper about our largest relationship, first of all, just to clarify on that. The dollar amount of what -- the carry balance of that is just its $49.1 million on our books, because we wrote off the $25 million just as a reminder.

That’s right.

Also second to that is I would tell you it is still -- even though it's on non-accrual, it is performing currently, and that’s largely due to the cash that was pledged at the inception of the loan and then we just continue to service that debt. So, it is a performing non-performer if you will. The issue that I think has been mentioned in the paper really should not have any direct bearing at all on our loan relationship. Our loans are to, what I would call, bankruptcy-remote LLCs, standalone LLCs that sole purpose was to purchase the assets. So, there really is no connectivity to what maybe going on at the holding company level of the company. So, I don’t think there is any direct bearing off what you’ve read about out there in the paper on Fletcher, excuse me, on our [indiscernible]. On your second question with regard to TDRs, I guess a couple of comments I would make on that. First of all and I know many of the analysts lump the TDRs into the non-accrual totals, and I am not sure I would think of it that way. When you look at our TDRs, for example, and I think I mentioned this in my comments in the beginning, but the past due, the 30:89 past due ratio on our accruing TDRs is 1.31%, which is not -- it's not as good as our overall portfolio, but it’s pretty acceptable given that these for the most part are classifieds. The second piece of that is, as time goes on, many of these through the restructuring and many times, restructuring is as simple as cutting the rate to a borrower who is struggling from -- we put a lot of floors in our credits and so maybe…

Well, I guess some of these TDRs, I guess, take time to season. But is there any sense -- is there any way to quantify what that default rate is on those?

Well, if you look at -- I don’t have exact numbers, but just for example, our total TDRs I think this quarter were right at $158 million. And of course, we had $126 million in total TDRs, yes, total accruing TDRs. That’s not an exact thinking of default rate because obviously you have some foreclosure in there. But I think somewhere in the 15% to 20% default rate historically is probably a reasonable estimate of what the default percentage has been. But my sense is, is that we’ll gradually start to see that decline going forward just when I look at the kinds of credits going in there.

Thank you. Our next question comes from Jennifer Demba with SunTrust Robinson. Your line is open.

Rex, I’m just wondering what kind of non-recurring charges you might expect to see in the next couple of quarters, particularly given the fact that you’re going to reduce headcount a little more this quarter?

Other than relating to non-recurring charges, I think we probably will see in the range of $400,000 to $500,000 possibly in the second quarter relating to severance charges with continuation, as Jimmy indicated, with the reductions that we’ve identified. That probably is the only other number we have right now as far as in the expense category of looking at it. Obviously, we pull our foreclosure costs out of the free-tax, free-credit, but that’s not a non-recurring, so. Did that help you?

Yes, it does. David, do you think the foreclosed property costs that you had, $3.8 million or so, is that sort of a good run rate going forward? Or do you think that’s going to be sort of lumpy from quarter-to-quarter still?

I don’t think we’re far off of a run rate. I mean, I’d say somewhere between $3 million and $5 million is a good estimate, but I think we could be right pretty close to that number going forward.

And I’m showing no other questions in queue at this time. I’d like to turn the program back to our presenters for any concluding remarks.

We have problems with the mic, but I wanted to thank everyone for being on the call this morning. I certainly want to encourage you to call David, Rex, or myself if you have follow-up questions. Thanks again and all have a great day.

Ladies and gentlemen, thank you for joining today’s conference. This does conclude the program and you may now disconnect.