Good morning, and welcome to United Community Banks' First Quarter Earnings and Merger Announcement Conference Call. Hosting the call today are Chairman and Chief Executive Officer, Jimmy Tallent; President and Chief Operating Officer, Lynn Harton; Chief Financial Officer, Rex Schuette; and Chief Credit Officer, Rob Edwards. Also on the call are Chief Risk Officer, Brad Miller and Director of Mergers and Acquisitions, Chris Zych. 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 as well as the Palmetto merger announcement and investor presentation 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. 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 and thank you for being on the call today. Today we will cover two items, our earnings for the quarter and our announcement of a merger agreement with Palmetto Bancshares. Palmetto is what we would call the ideal partner for expansion into the upstate South Carolina markets. We are extremely excited about the management, teammates, customers and business this combination will bring to the United franchise at about the value it will bring to our shareholders. More on the merger later in my comments. First, let’s discuss our earnings and business outlook. We are off to a great start for 2015. The solid first quarter results reflect our investments in new talent across the company and the successful execution of our business plans to grow revenue while controlling expenses. I will begin with some highlights. Net income was $17.7 million or $0.29 per share. Earnings per share were up 16% from a year-ago. Our return on assets was 94 basis points, compared with 85 basis points a year-ago. Our return on common equity was 9.3%, compared to 8.6% a year-ago. Total revenue excluding the provision was $73.3 million, up $7 million or 10% from a year-ago. Our margin held steady with the fourth quarter at 3.31%, and was up 10 basis point from a year-ago. We had strong loan production of $423 million with net loan growth of $116 million or 10% encarnalized. Our provision for credit losses was $1.8 million, net charge-offs were $2.6 million and our allowance ratio was 1.46%. Non-performing assets to total assets were 26 basis points unchanged from the fourth quarter. We had three non-core items during the first quarter. First, we repaid $6 million of an expensive structured repurchase agreement and redeemed $15.5 million in high rate trust preferred securities. In doing…

[Operator Instructions] Our first question comes from Jefferson Harralson of KBW. You may begin.

Hey, thanks guys and congratulations. I wanted to ask you about the cost savings, the 39% assuming on the high-end from what we usually see for what kind of an market deal I guess part of the branch footprint goes, can you talk about what makes it different, or what makes that 39% achievable?

Hey, Jefferson, this is Lynn. We went through is Jimmy mentioned earlier, we went through line-by-line, position-by-position with Sam and Lee who, obviously, we highly respect and who has Jimmy mentioned will be joining us to come up with the numbers. And frankly, our number was a little less than what they thought was achievable. If you look at Palmetto, really the way they had positioned the company, they had really positioned more for growth and it’s probably got the infrastructure of a bank, 2 to 2.5 times its size. Appropriately, through the crisis, they spent a lot of money in credit and compliance and other areas that was the right and proper thing to do and we did the same as just we don’t need to do that twice. And as Jimmy mentioned, we do have even some in-market synergies with both lease expense, expenses that we have in Greenville that we have invested there from a kind of a regional headquarters perspective that will also get some cost savings on our side. So, we agree it, its first glance it looks a little on the high side, but we are very confident in achieving those numbers.

Jefferson, I would add to with that that, I think given our efficiency and cost structure that we’ve been able to really demonstrating over the last few years in addition to the reinvestment of some of those still having a respectful efficiency. So we are very confident that this cost saves they are real, they are actionable and they will be executed.

Okay, thanks guys. And I want to ask for a follow-up on the SBA business, do you have handy what the amount of SBA loans that you originated this quarter and if possible how much you sold?

Sure, absolutely and we are very excited about what’s going on there. So, in the first quarter, a lot of people don’t know this, but the first quarter is traditionally the slowest quarter for SBA lending. The fourth quarter is always the highest quarter. So any SBA business you look at, the first quarter is the weakest quarter. We actually closed $27 million in the first quarter which is slightly up. We closed about $26 million in the fourth quarter. We funded $19.3 million. We sold a gross amount of $16.4 million, which the guaranteed portion then was $12.4 million. Our pipeline is very strong. So, it couldn’t really be more confident in or complementary of the SBA team and kind of where they are at and where they are going in the rest of the year.

Okay, thanks guys.

Thank you. Our next question is from Michael Rose of Raymond James. You may begin.

Hey, good morning guys. How are you?

Good morning, Michael.

Hey, just going back to the cost question, it looks like $5 million is reflective of foregone expenses related to branches you expected to build. So when I think about kind of on a core basis, the sub-58% efficiency target for this year, did that contemplate the $5 million?

If I understand the question correctly, Michael, our $50 million of the 39% cost saves, that does not include what we see as the investment cost that we would have and the length of time to expand into that market. So that’s not part of that number.

I guess, just what I am trying to ask is on a core basis, ex this deal, did your plan which calls for a sub-58% efficiency ratio this year incorporate $5 million of de novo branch costs in the Greenville market?

Yes, it does, but that – keep in mind, that’s a build-up over time. So it’s not $5 million in 2016. So, it’s the plan that we had to build it over time. So a portion of that, call it, maybe 20% in 2016 and rest of it deals over five years. So it was not – so that’s the way we have modeled it out and that’s what we had in plan to invest. Correct.

Okay, that’s helpful. I appreciate that color. And then, can you just talk about how this deal – how this deal came together? Was it a negotiated deal? Was it a short transaction, any thoughts or color there?

Well, they were represented by an investment banking firm. Honestly, we go back for the last couple of years, Michael, where Lynn and I were having conversations with the bank and investors and so forth, I think, you know, it’s a process that they probably have gone through over the last two three years. One of the points that Lynn was making today when you are at $1 billion and you are positioned to be a $3 billion bank, you have a pretty sizable infrastructure cost, and to grow the earnings at the rate that I know was their desire. It’s a challenge. So, I think, there is a combination of a number of things that being one, the merger with United is a – what we believe to be a perfect marriage from all those reasons we’ve already discussed and I think they just felt it was time to explore that opportunity.

Okay, that’s – go ahead

I was going to say, I might add, I mean, certainly, it was competitive. This is one of the most attractive franchises in the state. So as you can imagine it would been competitive, but I know, I believe from both Board’s perspective, I know from our Board’s perspective, it was – our combination was clearly viewed as a more strategically attractive, for all the reasons that Jimmy indicated. At the end of the day, we’ve got a transaction that makes us more profitable. It lets us grow faster. It positions us as a company in conjunction with our strategy as a more metropolitan franchise and earns returns significantly in excess of our cost to capital. So, and I think that’s what both Boards looked at and believed at.

Okay, that’s helpful, and then just one final question as it relates to both the mortgage and the SBA business, obviously, both are good quarters. Have you continued to add staff and maybe what’s the outlook from an expense perspective in adding staff in those areas or other areas going forward? Thanks.

Sure, on the SBA side, we are pretty much fully staffed now. And so, from here on out, it’s really ramping up more the revenue side than the expense side. On the mortgage side, we still have – we are still recruiting, but we frankly – the new mortgage loan officers and new training tools and new marketing that we put in place were actually ahead of where we expect it to be in production with a fewer number of originators. So, we think we’ve got room if we want to continue to add in that business.

Okay, great. Thanks for taking my questions.

Thank you. Our next question comes from Kevin Fitzsimmons of Hovde Group. You may begin.

Hey, good morning guys.

Hey, Kevin.

Just a couple quick questions. Jimmy, can you talk a little bit about – I think, we talked a little bit about this last call with the deal, but with that pending deal and now this is a larger deal, can you just give us a sense for – because you guys had been out of the M&A game for quite some time and then you took the first step with a smaller deal and now one coming in while it’s still pending. Just, give us a sense that you’ve touch base with the regulators and I am – obviously, I am sure, you are very comfortable or they are very comfortable with where you guys are in the process and then if you could dovetail into the whole $10 billion asset threshold question, because I think bolting all this together is kind of put you over $9 billion and how you view that threshold? Thanks.

Sure, Kevin. Thanks for the question. Yes, certainly, we meet with our regulators on a very regular basis giving them updates about the company, our views of potential M&A, our strategic vision, all of those kind of things. Certainly, this transaction was discussed with the regulators really some time ago. You do bring up a really good point on the fact that First National Bank in Tennessee will close it and maybe the first we have the conversion schedule into July. And the – and Palmetto would be scheduled to close, we believe, in early fourth quarter. What you’ll see today is a self-imposed, I should say self-imposed timeout, because these are two very important transactions. We want to be a 100% focused on the execution of these. Of course the Palmetto we have senior management they are on the ground, but also, their senior management there as well, we want that to be integrated and all of those things to perfection. In regards to the $10 billion mark, let me just ask Brad, our Chief Risk Officer, if you would to address that Brad?

Sure, Jimmy. As we’ve set out in our strategic plan, we’ve incrementally, an increase in the staff in the necessary areas as we approach $10 billion. Specifically, there is a BSA compliance, risk management. We expect to add an additional 7 to 10 members to the staff, mostly of which was already been budgeted for this year. We’ve already been – we’ve been running the de-fast stress test for the last two years and we have some flexibility in our securities portfolio to maintain the size, maintain our size under $10 billion and we’ll of course be mindful of the timing, and the size of any transaction that would put us over the $10 billion mark to maximize our Durban interchange fees.

So, basically, we have been staffing up for sometime for the $10 billion.

Lynn, just to add some color to that, some of the key areas that we have been focused on, so for example, compliance, if you look at our 2015 budget versus 2013 actuals we are up 23%, we are up 31% in credit risk, we are up 50% in the treasury function. Those were some of the key areas that you need to invest in to go over the $10 billion. We are not sitting here saying that we have all of it, but that’s a scoping of some of the investments we’ve already made the rest of the things we’ve got in our strategic plan as Brad laid out. So, we know that it’s there and we want to be ready for it.

Just as a quick follow-up, Lynn, can you touch base on just loan growth, what loan growth looks like in that Greenville market, because I cover Palmetto and the one thing they’ve done a great job overhauling the bank and cleaning it up. But the one things that’s been the problem over the last several quarters is just growing the loan book. And a big part of that as I understood it was just that, it was so competitive that pay downs were always such a big headwind for them that you always had such a high hurdle to put net positive loan growth. So, is it that competitive, or are you guys in a different ballpark from what they were doing in terms of loan growth? Thanks.

Sure, great questions. First of all, it is very competitive. It’s certainly though no more competitive than Atlanta or Savannah or Knoxville or all those other places that we are competing in and winning. I think a couple of things as I’ve gotten to know that team even better there. Number one, some of their pay downs has been similar – frankly to some of our historic pay downs that are now lessening in their change in the mix of their book of business. So, some of their higher risk credits that that previous management had been involved with are, those were some of the biggest pay downs they’ve got and then they are nearing the end of that piece. Secondly, I’ve been really impressed with the team they’ve brought in over the last year on the lending side and it takes a little while that those to gain traction. So went through their pipeline. We’ve seen their first quarter results and we really feel confident that they are gaining traction. Of course, we also do have slightly higher lending limits that will be additive to their team, most of the team they’ve brought it comes from larger banks and they’ve been a bit hampered on the lending on the size, capacity. We bring products, asset-based lending for example that, have teammates that are familiar with and just haven’t been able to fully utilize that product. And the – as Jimmy mentioned, the joint, just presence of leadership, Sam and I have been knocking heads against each other and we think that gives us a little – we go jointly on some. We think that gives us a little extra this not bank that baked into the deal. So, a long way answer and say it is competitive, but their momentum is building and we are confident in that.

But there is another component of that too that, Lynn you may want to comment on that, with our combined presence and really the opportunity to even bring additional lenders on board.

That’s very true and that is something we have not put in the numbers. But, we do know a number of very high quality lenders that either we have worked with before or know well, that frankly need a larger platform to – because of the scope of their business to operate in and we are pretty confident based on inbound calls that we’ve already been getting that we can attract some of those, good number of those potentially into what we think now is the best most best lending platform in the Upstate. So, that’s not in our numbers, but we are also excited with that fact.

Okay, thank you very much guys.

Thank you.

Thank you. Our next question comes from Christopher Marinac of FIG Partners. You may begin.

Thanks, I was curious, I guess pro forma for the two acquisitions here, Jimmy and Rex, what do you think you will do with the loan-to-deposit ratio? We kind of seek and move that up from 75 to 80 plus and is that a source of future earnings as 2015 develops?

Yes, I would agree, I think, they have an exceptionally strong core deposit base, again with the low deposit rate on top of it. So I think we will benefit from that. As Jimmy indicated, hoping to close sometime by early fourth quarter. I think it does give us an opportunity as we continue to build loans as Lynn just indicated. I think there is some opportunity for us there to continue to grow. So I think the mix will continue to see increase and again a more focus again on the core deposit base that they have also combined with our base. And you’ll see in our base, we had excellent core deposit this quarter, little over $200 million of core deposit growth, over half of that in DDA, more than funding of loan growth at the same time. So, I think we feel very comfortable where we are at and again trying to utilize our core deposit base for future growth.

Okay, and just a point of clarification, Lynn, when you look at the cash flow of the portfolio, and the incredible yield as you get to those decision in the future, is any of that embedded in the payback period as an accretion capital that we see in today’s presentation?

Are you looking at the purchase adjustments that we would have with Palmetto? We’ve already looked at the preliminary numbers on that and I don’t think it will be a significant number for accretion versus the United credible discount that we’ve looked at already but there will be a little bit of accretion coming in. But I don’t think it will be a material number, Chris, numbers on a pro forma.

But even which is not part of what you laying out?

If you could repeat that, I didn’t hear you as well.

It’s not included in what we are seeing on the accretion?

Yes, it’s not included right now. That’s incremental.

Got it. Just wanted to clarify that.

Yes.

A final follow-up just back to the earnings from this quarter, when you look at the loan growth and the loan by category as you laid out to us, will the mix on the – particularly the specialty side, either same as this year develops or will we see that, perhaps being less and at a traditional area it’s catching up as second, third quarter comes in provision.

Yes, so if you look at production on Slide 7, we’ve seen solid increases in production across, if you take out South Carolina, which includes the specialized lending, it’s up 21% and we see continuing momentum there. You may recall last quarter we announced an additional region or LPO in Atlanta, what’s not in here is the F&D team who, as Jimmy mentioned earlier, we are very impressed with and the more time we spend with them, we are more impressed with. So, we feel good about the traditional markets if you will continuing to pick up. And if you look at the production, by far the majority of it is coming at their traditional markets. Now we don’t foresee the specialized lending slowing. We think, it will continue at its current pace. It’s not going to continue at the current growth rate that it’s at. And if you look at a year ago, doubling we are not going to continue to double it, but it will continue at this kind of production rate that we are at today.

Great, thanks, Lynn. I appreciate it.

Thank you. Our next question is from Nancy Bush of NAB Research. You may begin.

Good morning. How are you?

Hi, Nancy.

Couple questions. Did you disclosed the restructuring costs?

Chris?

Yes, hey Nancy. Restructuring cost in this deal, I was just seeing in the package is about $20 million.

Okay, and that’s slated primarily toward what?

There is certainly, in terms of the breakout?

Right.

It’s mainly – if you want to put it in two larger categories, our three larger categories maybe, it’s professional fees, as you would imagine. We have a certain amount that we’ve built in for the employment side. There is contract certainly in place there that we are settling and then DP is a large chunk of that. It’s probably, 20% of that number in terms of the contract terminations and so forth that will be having to settle.

Okay, and also, I’d go back to this 39% of their base that you anticipate saving, that would – and I think that was question number one. That was certainly anticipated or it would me see that it’s more than HR, it’s more than back-office et cetera? Are there additional things in there that I am missing?

Nancy, again, Chris. Yes, I mean, you are good in running the head. I mean, it’s basically going to be a lot of operational redundancies that are we’ve identified there and you are right it’s just their basic operations and DP. Those are the two main components of it, you can probably call that, two-thirds of it there within that piece and the rest is somewhat choppy honestly.

Okay, and then just one final question. I think you said that the IRR would exceed 20%. Can you tell me how you or what you think your internal cost of capital is, how you figure it and where is it?

Yes, I mean, you are right, we did disclosed greater than 20%, our internal cost of capital is in around 9%.

Okay, okay. Thanks very much.

Thank you. I am showing – our next question is from Jennifer Demba of SunTrust Robinson Humphrey. You may begin.

Hello, this is Michael Young in for Jennifer. I just had a quick question as it pertains to cross in the $10 billion asset threshold. Have you done any preliminary work around what that will mean from a Durban amendment perspective in terms of your fee income?

Yes, we have, Brad?

Yes, Mike. Right now, looking at our numbers, we think it will be about a $6 million to $7 million impact, of course, a number that can change and a number that will stay closely on top of that near $10 billion.

Okay, perfect. Are there any offsets to that? Any programs or anything that you could implement or is it just too early to value?

It’s probably a little early on that, Mike. But certainly, crossing over the $10 billion mark, that’s got to be part of the cost that you would include in the transaction to make sure that all the numbers lined up and it became accretive to our shareholders. I am not sure there is way of lessening that in any meaningful way.

Okay, thanks.

Thank you. I am showing no further questions at this time. I would like to turn the call back over to Jimmy Tallent for closing remarks.

Thank you, operator. Once again, than you all for being on the call. Thank you for your interest in United Community Bank. I am very proud of our people and what they’ve accomplished this quarter. We are very excited about our partnering with Palmetto Bank. I am very proud about where United Community Bank is today. Thanks again and hope you have a great day.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. Have a wonderful day.