Good morning and welcome to United Community Banks' first quarter conference call. Hosting our call today are our President and Chief Executive Officer, Jimmy Tallent; Chief Operating Officer, Lynn Harton; Chief Financial Officer, Rex Schuette; and Chief Risk Officer, David Shearrow. United's presentation today includes references to core pretax, pre-credit earnings and other non-GAAP financial information. For each of these non-GAAP financial measures, United has provided 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 this morning 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. Now 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 first quarter conference call. Overall, I'm pleased with our first quarter results. We saw an expected seasonal dip in revenue, which we were able to offset by reducing operating expenses. This, along with lower preferred stock dividends, allowed us to achieve solid growth in earnings per share. I'll talk more in a moment about the drivers of our first quarter results, but I will begin with some highlights. We earned net income of $15.4 million. Net income available to common shareholders was $15 million, up $2 million or 15% from the fourth quarter. We earned $0.25 per share, up $0.03 or 14% from the fourth quarter. We grew loans by $27 million or 2% annualized. We increased core transaction deposits by $135 million or 16% annualized. Compared to a year ago, we're up $278 million or 8%. Our provision for credit losses was $2.5 million, and our net charge-offs were $4 million. Both are down from the fourth quarter. Nonperforming assets were $31 million or 42 basis points of assets, down slightly from the fourth quarter. I am delighted to report that early in the first quarter, all of our preferred stock was redeemed. Our efficiency ratio improved to 59%, and following the redemption of our preferred stock, all of our capital ratios remained solid. Now I'll share some details of those results and our outlook for the rest of the year. As you can see on Page 11 of the investor presentation, core pretax, pre-credit earnings were $27.4 million, down approximately $600,000 from the fourth quarter and up $1.1 million from a year ago. The decrease from the fourth quarter was primarily related to lower net interest revenue and fee revenue resulting from 2 fewer days in the…

[Operator Instructions] Our first question comes from Jennifer Demba of SunTrust Robinson Humphrey.

Question on the mortgage operation. Have you totally built that out in Atlanta and other markets at this point, Jimmy, or are you still hiring on that front?

Let me ask Lynn to address that, Jennifer.

Great question, Jennifer. We have not yet begun the hiring process. We've got several teams that are lined up. But we're also -- to be able to do that, we need to make some improvements in our products and our backroom operations. So we're doing all that together. And we believe we'll, again -- hiring of the producers in this quarter, the second quarter.

Okay. Do you have a goal in terms of the size of the operation, the income goal or anything like that?

Long-term goal is, we think relative to peers, we're doing about half the revenue in production that we should be, given our -- the size of our company and the quality of our brand. That's not something that you're going to do overnight, but we think over a 6- to 8-quarter period, we ought to double what we're doing today.

Our next question comes from Jefferson Harralson of KBW.

My question is on loan pricing. It seems like a recurring theme, but maybe even more we have seen in this quarter. Can you just maybe, could you go deeper for us there and just let us know what's going on within loan pricing in your markets?

Sure. Let me just -- I'll start with that, Jefferson, and then ask Lynn or David or both to comment. Certainly, pricing continues to be very, very challenging. Certainly, the type of credits that we target, which obviously are on the upper end, you've got a number of banks that are chasing those. And certainly, there's times where we'll have to compromise our pricing, though we're not going to compromise our underwriting standards. But that's the market that we operate in, and that's just the business environment that we're all dealing with. Lynn? David?

I think that's exactly right. Probably the biggest change going on right now is in fixed-rate pricing. And one of the reasons, our derivative business was down this quarter was some of our competitors, larger banks, primarily, are doing a lot of fixed-rate financing on balance sheet. So that's an issue we're dealing with. On terms of the spread themselves, they seem to have flattened out. So we're not seeing as much spread compression, but we are seeing more fixed-rate competition.

So kind of 10-year terms on that?

Yes.

We'll go ahead and go to the next participant from Christopher Marinac of FIG Partners.

Jimmy, I was noticing the continued increase in Atlanta of loans relative to North Georgia having slight declines. Do you think that can reverse as this year plays out?

Chris, I'm sorry, you were breaking up. Can you ask that again?

Can you hear me now? The loan numbers in North Georgia have been declining the last few quarters, and Atlanta continues to increase. Is that a trend that we should expect to continue, or do you think that there may be some reversal, particularly in the North Georgia trend?

Well, the outstandings have decreased. And we'll continue to see some of that over the next few quarters, I believe, Chris. And that is the result of more of the residential real estate that's continuing to either pay off or actually exit the bank. That's the biggest headwind with that. Though we're continuing to see what I believe to be decent production, but I would suspect we'll see the North Georgia balances maybe continue to retreat downward at a slower pace as we move out on the time horizon.

Okay, great. And then as a follow-up, can you just remind us on the indirect Bado [ph]? Any of that being sourced within your markets, or is it all going to be external?

Yes, Chris, it's David. The indirect portfolio we've been buying is Southeast originated. A small piece of it would come as far as Texas, but most of it is originated in Florida, Georgia, Alabama, the states either in, that we're in footprint or contiguous to where we are.

David, should we expect that to get larger as this year plays out as a percentage or stay about the same?

I think as a percentage, it will stay about the same. You could see a little bit of an increase there from where we are currently. But given the pace of pay off on that portfolio, about how rapidly it turns, I think we're getting to a place where the growth there will be fairly nominal and really relative to the overall balance sheet, shouldn't really increase much more from where it is. Although it could, in a given quarter, increase by maybe a percent, something like that.

Our next question comes from Taylor Brodarick of Guggenheim Securities.

Jimmy, when you were reviewing all the significant strategic actions taken over the last year, kind of what's your thoughts on whether it's -- M&A, what you wish those would be, markets or even other actions like the trust preferreds and just kind of -- I'd love to get some color there?

Sure, sure, sure Taylor, great question. Certainly, in the M&A arena, we have certainly interest there. It still falls within the guidelines that I've shared before, the lower risk strategically positioned as well as financially compelling. Our view today would be, when you ask about the geography, we're certainly focused on the more metro markets. And we think that, that will provide opportunities for us over time. Conversations have been going on with various banks, continue to go on. But I do see that, that has good potential as we move through 2014.

Great. And I guess part of that discussion, if there's no deal that come up, would you consider, along with the board, talking about reinstituting the dividend in the near future?

Sure. But really, when we look at the capital management, there's a number of components there. To begin with, our capital is building at a nice pace, the earnings, of course, but also the PPA accretion that adds to it each quarter. But there's many factors to consider as far as capital management, certainly supporting our organic growth as we look at acquisitions of cash dividends, stock buybacks. So all of that is kind of baked in. A modest cash dividend would be appropriate at an appropriate time. "Is it now," is kind of the question, and certainly, that's something our board is discussing.

Our next question comes from Matt Olney of Stephens.

I want to go back to expenses. And on previous conference calls, you've highlighted some items on the expense side that would decrease. And we've seen this play out over the last few quarters with the professional fees coming down, FDIC assessments coming down. From where we stand today in the first quarter, is there anything else that would fall out in 2014 from current levels that could help offset the investments you're making for the new hires?

Probably there's a small piece in there if you look at it on a linked-quarter basis where there's still some further opportunity. Obviously, in the first quarter, you have the payroll taxes, which is about $500,000 impact, that will come down over the next few quarters. Additionally, within their kind of loan production, as that continues to increase, our deferred costs under FAS 91 will help pay for some of that also. There's probably $300,000 to $400,000 run rate there that could pick up that would reduce the salaries. And I think overall, when you look at the expenses, they're pretty well at -- pretty firm run rate. I think there's maybe a little more in professional fees, not a lot in FDIC. I think it's a pretty true run rate going into the balance of the year other than growth and assets will impact that a little bit. So I think we're at a pretty good point -- inflection point right now on our run rate.

And going back to the margin, you mentioned there'd be some pressure there, primarily from the loan yields. Are there any mitigants to that, that could help offset that margin pressure?

Well, I think the margin pressure has probably a couple components, as Jimmy indicated. I think the competitive loan pricing even though we had a very positive first quarter, which really helps our margin a little bit. We -- our average [indiscernible] pricing this quarter was 4.4% compared to probably sub 4% over the past 4, 5 quarters. So that part helped us, but I think as we continue and focus on loan growth, that is going to get squeezed. We have a little bit of benefit still with respect to our CD pricing. But again, that's pricing on average, probably around 15 basis points a month on our new and renewed. That'll help us a little bit, but it's already -- most of the CDs coming in now are probably averaging about 30 basis points. So we'll have a little impact in reducing our cost from that standpoint. And again, we've done other actions as we continue to look at swaps, customer swaps. Even though the volume was down. This quarter, we expect that to pick up some, going into the balance of the year. Again, it's competitive with fixed rates out there, but we think there's some opportunity. So I do see it still, as Jimmy indicated, still seeing a compression in the balance of the year with loan growth being a driver in competitive loan pricing.

Let me add a point there too, Matt. I think it's also good to look back, particularly over the last year when we've been able to reduce the core expense run rate of the company substantially and really even further back than that. But while that was being accomplished, we were also adding a number of new strong leaderships and drivers in specific businesses, as well as adding additional revenue generation folks. So we've kind of traded that out, so to speak, from the expense side and reinvested, while we've been bringing that overall cost basis down. So we also have a strong eye on the revenue generation as well.

Right. And maybe one other point on that, Matt, in the context of the margin is, is relating overall to our interest rate sensitivity and looking at our sensitivities, so we're fairly conservative in light of -- we're knowing that rates are going to rise some time in '15. It may be earlier, but definitely '15. And in that, we're balancing both on our loan portfolio with respect to fixed and floating, as well as in our securities portfolio. As Jimmy indicated, we have 39% of our securities in floating. That obviously is fairly conservative. When you look at peers out there, but again it puts us in an excellent position when rates do begin to rise. And part of our interest sensitivity is to have that taken into consideration. So as rates will rise, we'll have anywhere from a 3% to 5.5%, 6% positive benefit on a 100 or 200 basis point ramp.

Our next question comes from Michael Rose of Raymond James.

Just a question on, I don't know if you touched on this, but I didn't see it in the slide deck this time. The kind of the path to the 1% ROA, is there any kind of update there? And have any of the drivers materially changed, and can you comment maybe on timing around achievability?

Sure. Certainly, one of the key elements today would be the loan growth, Michael, as we continue to move through 2014. But really, to give you a little bit of more color on that 1% -- 1% ROA run rate by Q4. When we set that goal initially, that was before the capital rules were being finalized, and at the point in time, the trust preferred was actually going to not qualify for Tier 1. When it was finalized, it became Tier 1 Capital. And initially in our ROA plan, the -- our process would have been to pay off the trust preferred. By doing so, of course, helps ROA. When all was said and done and the plans were finalized, it certainly made much more economic sense to pay off the preferred and eat the trust preferred. The benefit of that is the EPS growth, and it accelerates from that. So obviously, EPS is what drives economic value and shareholder value. We still have the 1% target by Q4 of '14. There is a chance that, that could be pushed out a quarter or so, but the end result is EPS is actually accelerating.

Thank you. I'm not showing any further questions in queue. I'd like to turn the call back over to Jimmy Tallent for any further remarks.

Thank you, operator. We'd like to just thank everyone for being on the call today, certainly, your continued interest in United Community Banks. If there's additional questions that could be answered for you, we certainly ask you to call any of the 4 of us. Again, thank you for being on the call today, and we hope you have a great day.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.