United Community Banks Inc (UCBIO) 2004 Q1 法說會逐字稿

Good morning, and welcome ladies and gentlemen to the United Community Banks First Quarter 2004 Earnings Conference call.

At this time, I would like to inform you that all participants are on a listen-only mode.

At the request of the company, we will open up the conference for questions and answers after the presentation.

I will now turn the conference over to Jimmy Tallent, President and CEO of United Community Banks.

Please go ahead, Mr. Tallent.

I'm Jimmy Tallent, Chief Executive Officer of United Community Banks and with me is Rex Schuette, our Chief Financial Officer.

Here at today's conference call, I'd like to update you on three key areas.

First, to brief you on another record quarter for United Community Banks.

Second, update you on several growth initiatives, and finally reaffirm our earnings guidance for 2004.

First I'd like Rex to review our forward-looking disclaimer.

Thanks, Jimmy.

The earnings announcement that we released earlier this morning is available on our Web site, as well as other financial sites.

Also this call is being (inaudible) cast on the site in the Investor Relations section.

During the course of this conference call, we may make certain forward-looking statements.

These include all statements, that are non-statements of historical fact, or statements regarding the intent, belief or expectations of United Community Banks, and its senior management, with respect to trends affecting our operations, our financial, economic and market conditions and our growth and operating strategies.

Specifically, earnings expectations and estimates are forward-looking statements.

During the call, we may refer to non-GAAP financial measures.

Our news release explains the difference between non-GAAP earnings measures, and earnings calculated under GAAP.

We provide these non-GAAP measures because we believe they are helpful in analyzing core performance trends, at the United Community Banks.

We filed our news release on Form 8-A earlier this morning.

And we urge you to review the sections of our most recent Form 10-K, and 10-Q that describe the factors that may affect our future results of operations.

Any forward-looking statements contained in this, or other corporate statements of the United Community Banks, or made by its senior management, should be considered in light of those factors.

Let me add one more introductory comment.

On March 15th, 2004, United Community Banks announced a three-for-two common stock split, effective April 28th for shareholders of record on April 14th.

Also we filed an 8-K with historical information, which reflected the pro forma stock split.

All per share amounts in this news release and our conference call today reflects the stock splits, as if it had occurred prior to the earliest period presented.

Thank you, Rex.

As I said earlier, this morning's news release, details another record-setting performance for United Community Banks.

For the first quarter, we reported a 20 percent increase in total revenue, a 27 percent increase in net operating income, and a 15 percent increase in net operating earnings per share, all compared to the first quarter of 2003.

Now these numbers represent another outstanding performance in a challenging, economic environment, and I'm proud of the results, and especially the people at United Community Banks, who made it happen.

But I'd like to suggest that our first quarter once again, demonstrated far more than our ability to put strong numbers on the board.

It demonstrated the validity of, and our firm commitment to, the key drivers of our success and franchise value.

These include, a focus on, really, a passion for staying true to our roots, to meet the community banking needs of our customers.

A determination to maintain strong loan growth, and exceptional credit quality, a constant drive for overall growth, at the same time we diligently monitor and control expenses, and our commitment to keep building for the future.

Opening de novo banking offices, making the right acquisitions and attracting the core deposits that we need to continue this level of performance well into the future.

These drivers -- really the cornerstones in our strategy for growth, are more than just words on a mission statement.

As I'll point out when I describe my first quarter performance in more detail, we execute our plan.

In an economy where many public companies are hesitant to make predictions, we have stated our goals clearly.

We are targeting sustained, double-digit earnings per share growth, and a return on tangible equity of 18 percent or greater.

We hit those targets in 2004's first quarter.

And we're on target to deliver another strong performance for the year.

Let me summarize just a few of the first quarter's numbers.

Later Rex will provide more detail.

Net operating income rose to a record $10,900,000, up from 8,600,000 a year ago.

That's a 27 percent increase.

Diluted operating earnings per share totaled 30 cents, a 15 percent increase from the 26 cents in the first quarter of 2003.

Total revenue on a tax equivalent basis was $45,300,000, a 20 percent increase compared to last year.

And return on tangible equity was 19.87 percent, above both our long-term goal of 18 percent, and a 17.79 percent we achieved, in the same quarter, a year ago.

At March 31st 2004, loans were $3,100,000,000, up a 131,000,000 from the quarter and excluding acquisitions were up 14 percent from last year.

Those are strong numbers in this economy -- or really in any economy.

Now let me give you the highlights of our performance compared to last year.

First loan growth -- the heart of our business.

I mentioned earlier that we're committed to maintaining strong loan growth and strong credit quality.

We did that in the first quarter, and we did it through both core banking growth, and acquisitions.

Hire or buying growth isn't our strategy, which is shown in our internal growth numbers.

We grew core loans by 14 percent or $369,000,000, as loan demand remained strong across all of our markets.

Clearly that represents a significant in our existing footprint.

In addition to that core loan growth, acquisitions contributed another $232,000,000 into loans, which brought total loan growth to $601,000,000, as compared to last year.

Loan growth without sacrificing credit quality is one of those key performance drivers, I mentioned earlier.

I'm pleased to report that our credit quality trends continued to remain strong.

You've heard me say this before, but it's worth repeating, we're varied lenders.

And in today's economic environment our long-term strategy of securing loans, with hard assets, makes more sense than ever before.

As I noted, loans grew about $601,000,000 over the past year, while our bank's non-performing assets declined by $500,000, leaving first quarter's 2004 non-performing assets, at $7,300,000.

Non-performing assets also declined as the percentage of total assets standing at 18 basis points at March 31st 2004.

The first quarter also saw us deliver growth in core deposits and related fee revenue.

I'll let Rex tell you what the growth was.

Let me explain a bit how we achieved it.

United Community Banks has a unique footprint, doing business to some of the Southeast, fastest growing regions.

But we're not comfortable just relying on the overall positive trends in those regions.

We'd intensified our efforts to grow core deposits and related fee revenue.

In early 2004, we began a company wide direct mail and solicitation program to increase our core deposit base.

One of the elements in this program is to encourage and reward both our customers and employees to refer a friend to United Community Banks.

Sounds simple, though we call the United Community Banks, "The Bank That Service Built" and that's more than just an advertising slogan.

Customer surveys show that we do set the standard for service.

And that more than 95 percent of our customers say that they have or would refer friends, family and neighbors to bank with United.

We track customer satisfaction very carefully.

And over the last year, our customer satisfaction rate improved from 87 percent to 91 percent, a level already well above the average core for all banks of 75 percent.

Customer satisfaction generates customer loyalty.

And the "Refer A Friend" program leverages that loyalty and the passion that we have for serving our customers.

We even found that more than 90 percent of the people who close accounts at United Community Banks, usually because they relocate out of our service area, still say, they would refer a friend to us.

The initial results of this program have been extremely encouraging with new accounts openings up 50 percent, from a year ago.

One of the growth drivers, I've mentioned earlier, was an unmatched focus on meeting the community banking needs of our customers.

That's another one of the growth drivers I mentioned earlier.

And in the first quarter, we started to leverage that driver to grow core deposits.

Looking at the expense out of the ledger, we're hitting the mark there too.

Excluding the impact of acquisitions, total revenue for the quarter increased by approximately 8 percent, while operating expenses rose by just 4 percent.

We continued to grow our customer base that drives our revenue, by diligently monitoring and controlling expenses, which produces positive operating leverage.

In the first quarter, that leverage was an important contributor to our 15 percent growth in operating earnings per share.

Another growth driver is strategic de novo office openings and selective acquisitions.

We continue to implement this strategy, opening two new banking offices and identifying another merger target that we believe will accelerate our growth, and enhance our presence on the Southside of metro Atlanta.

I'll talk more about the bank offices and mergers in my closing statements.

But for now I can comfortably state that United Community Bank's strong first quarter performance confirms both the effectiveness of our long-term growth strategy, and the ability, and commitment of our people to execute our strategies, and business plans.

A plan built on maintaining those core strengths, as I mentioned earlier.

Now let me ask Rex to discuss the financial performance for the first quarter in more detail.

Rex?

Thanks, Jimmy.

For the first quarter, net operating income rose to a record $10,900,000, up from $8,600,000 a year ago, and 10,600,000 in last year's fourth quarter.

Diluted operating earnings per share, reflecting the three-for-two stock split, totaled 30 cents per share this quarter, up from 26 cents last year.

As the news release pointed out, net operating income for the first quarter of last year excludes pretax merger related charges of $840,000 related to the March 2003 acquisition of First Central Bank.

If we added those merger charges back with net income and earnings per share, then last year's first quarter numbers would be $8,100,000 and 25 cents respectively.

Turning back to operating earnings, total revenue on a tax equivalent basis was $45,300,000, up from 37,700,000 or 20 percent from a year ago.

And return on assets was 1.08 percent compared to 1.07 a year earlier.

Net interest revenue for the first quarter increased 23 percent to $37,800,000.

Our acquisitions during 2003 included two bank mergers and the acquisition of three bank offices.

This contributed approximately 3,500,000 for the first quarter's 7,000,000 increase in tax equivalent net interest revenue.

Excluding these acquisitions, net interest revenue was up 12 percent.

Net interest margin was 3.99 percent for the first quarter.

And in the range our four percent level we maintained for the last six quarters.

And we expect to maintain this four percent level for the remainder of 2004.

Loan balances at the end of the first quarter 2004, increased by $601,000,000, compared to last year's first quarter.

Again, we enjoyed strong core loan growth across all of our markets, which we attribute to both the strength of our markets, and our customer's preference for the level of community banking service we offer.

Our core loans grew by 14 percent or $369,000,000.

And the 2003 acquisitions added another 232,000,000 in new loans, bringing our total loan growth to 601,000,000, or 24 percent.

As I noted, loans are up $601,000,000.

Let me provide to you the breakdown of that growth by geographic markets.

We have loan growth of a 154,000,000 in our North Georgia markets, 108,000,000 in Metro Atlanta, 84,000,000 in Western North Carolina, 234,000,000 in Coastal Georgia -- we added Coastal Georgia last year when we merged with First Georgia Bank on May 1st and added to that market later in the fourth quarter when we opened de novo bank in Savannah.

And the 21,000,000 increase in East Tennessee.

East Tennessee is also a new market for 2003.

And we open de novo office in Athens, Tennessee this quarter.

Jimmy will have additional comments on Athens and other growth initiatives during his closing remarks.

Looking at consecutive quarters, total loans increased by a $131,000,000 or 17 percent, on an annualized basis.

Here's a breakdown of where that growth took place - 56,000,000 in North Georgia, 19,000,000 in Metro Atlanta, 38,000,000 in Western North Carolina, 12,000,000 in Coastal Georgia, and 6,000,000 in East Tennessee.

Looking at our growth by loan categories, the year-over-year comparisons were as follows.

We had 252,000,000 growth in construction and land development loans, bringing a total to 993,000,000, an increase of 159,000,000 in commercial loans, bringing the total to just over 1,000,000,000.

And an increase of a 189,000,000 in residential mortgages, also bringing the total to just over $1,000,000,000.

On a consecutive quarter basis, construction and land development loans increased 66,000,000, commercial loans grew by 38,000,000, and residential mortgages grew by 29,000,000.

As I mentioned earlier, net interest margin for the first quarter was 3.99 percent, down six basis points from last year, but improved by three basis points from the 3.96 percent, in the fourth quarter of 2003.

Our margin has been stable for the last six quarters.

Let me update you on the interest rate sensitivity of our balance sheet at the end of the first quarter.

We are asset sensitive by approximately 3 percent, on net interest revenue, which is up from 1.5 percent last year, based on a ramp-up in interest rates of 200 basis points over the next 12 months.

The interest sensitivity has increased slightly since we continued to add prime daily floating rate loans, which totaled approximately 1,600,000,000 at quarter end up from the 1,100,000,000, a year ago.

As Jimmy discussed earlier, we initiated a company-wide core deposit program in January 2004.

This includes a direct mail campaign, coupled with an incentive program for employees, as well as gifts for customer referrals.

In the first quarter we added over 10,000 new checking and savings accounts, which has increased our deposits by more than 50,000,000.

Very encouraging results for this early in the program, and we expect to continue the program to the balance of 2004.

Total deposits at quarter end were just over $3,000,000,000, excluding large CDs - core deposits totaled 2,200,000,000, and roughly 11 percent over last year, when you exclude the impact of the acquisitions.

Moving to fee revenue -- total fee revenues for the quarter was $9,300,000, an increase of 900,000 or 11 percent from the year earlier total, of $8,400,000.

Service charges on fee and deposit accounts were $5,000,000, up 1,400,000.

Brokerage fees totaled $700,000, an increase of 300,000, due to strong new business and market activity, and mortgage loan fees of 1,300,000 were down $1,000,000 from a year ago.

The 1,400,000 increase in service charges in fees, was due to the acquisitions, growing popularity of new products and services, and new accounts and higher transaction fees.

Our brokerage business continues to expand and we have been pleased with performance this past year.

The decrease in mortgage loan fees was, of course, due to the lower level refinancing, all thanks to the scene, with the rise in long-term interest rates.

Now lets turn to operating expenses.

Jimmy provided the bottom line picture noting that excluding acquisitions, operating expenses grows only four percent on a year-to-year basis.

Total operating expenses for the first quarter were $28,200,000, up 4,300,000, or 18 percent from last years first quarter.

The two mergers and the acquisition of the three branches in 2003, added approximately 3,300,000 in operating expenses to this year's first quarter total, leaving a core expense growth rate of approximately four percent. .

You can see a similar pattern when you look at the salaries and employee benefits cost, which increased by $3,000,000, or 20 percent, as compared to last year, and totaled $18,100,000 for the first quarter.

However, approximately $2,000,000 of this increase resulted from the acquisitions in 2003.

The balance over growth reflects normal merit increases, primarily offset by lower incentive compensation, further decline in mortgage refinancing activities.

Communications and equipment expense totaled $2,500,000 for the quarter.

An increase of $6,000,000, or 34 percent, from last year, primarily due to the acquisitions, and our investment in technology equipment, to support business growth, and enhance operating efficiencies.

All other operating expenses totaled $7,500,000 for the first quarter, up from the $6,900,000 last year.

About half of this increase was due to the acquisitions and the related amortization of core deposits and tangibles.

As Jimmy explained in his opening comments, maintaining that balance between growth and expense control is a priority for us.

And the first quarter results confirm that we continue to focus on this objective.

Because we've grown to more than $4,000,000,000 in assets, and continue to provide double-digit growth in operating earnings per share.

Balancing growth with exceptional credit quality is another continuing priority for us at United.

The first quarter's provision for loan losses was $1,800,000; up $300,000 from a year earlier and unchanged from the fourth quarter of 2003.

The allowance to loan ratio was 1.27 percent, down slightly from the 1.30 percent a year ago and from 1.28 percent at year-end, due primarily to the strong loan growth and the lower level of non-performing loans.

Net charge-offs for the quarter were just over $600,000 down from $1,000,000 last year and $900,000 last quarter.

Net charge-offs to average loans were eight basis points down from 17 basis points last year and from 12 basis points in the fourth quarter of 2003.

Over the past two years, net charge-offs have averaged about 15 basis points.

And we would expect net charge-offs be closer to those historic levels for the balance of 2004.

Our allowance for non-performing loan coverage ratio was 579 percent at quarter-end as compared to 481 percent a year ago and 583 percent at year-end.

Non-performing assets of $7,300,000 were down $500,000 from a year earlier and down $300,000 from the fourth quarter.

Non-performing assets included $6,900,000 of non-performing loans and $400,000 of other real estate alone.

There were no loans more than 90 days past due that were still accruing at quarter-end.

During the first quarter, we hit yet another milestone, where our total shareholders equity topped $300,000,000.

We continue to build internal capital to support our future growth.

All of our capital ratios for regulatory purposes are above the well-capitalized level.

Also, our capital ratios are above our own internal guidelines, which were set at 100 basis points above those regulatory levels.

We actively monitor our capital ratios.

And as I noted last quarter, we expect to file our universal equity and debts shelf with the SEC later this quarter for future flexibility in managing our capital position.

As noted last quarter, we do not plan to immediately issue equity, but we want to be in a position to increase capital if warranted.

For the first quarter return on tangible equity was 19.87 percent up from 17.79 percent a year ago and above our long-term financial goal of 18percent or higher.

Our average tangible equities on assets for the quarter was 5.88 percent down from 6.47 percent a year earlier due to the acquisitions completed in 2003.

In summary, we saw a strong financial performance and achieved another record-setting quarter for United Community Banks.

We hit our key targets for sustained double-digit earnings per share of growth and return on tangible equity.

We maintained strong growth in the loan portfolio and we did it on proving our key credit quality measures.

We enjoy strong key revenue growth, not just because of our acquisitions, but also because of our continued growth in our core fees are absorbing the decline in mortgage loan fees.

And even with that strong growth, we've maintained the effective controls we've long exercised over operating expenses.

In short, we delivered the numbers the right way, consistent to plan.

With that, let me turn the call back to Jimmy.

Thanks, Rex.

Once again, we've had the opportunity to talk with you about another excellent quarter for United Community Banks.

We've achieved those strong results by remaining highly focused on improving growth strategy - a strategy that has consistently delivered high levels of both internal growth and growth through selective mergers.

And a strategy that has also delivered consistent and dependable double-digit earnings per share growth.

We achieved our first quarter results the right way.

We achieved strong loan growth internally and through acquisitions while maintaining credit quality.

We achieved strong revenue growth while maintaining stringent expense controls and positive operating leverage.

We reported strong earnings growth, but we also invested in future growth.

And underlying it all, we enjoyed some of the most important statistics, our customer satisfaction scores.

They continue to convince us we are achieving financial success by maintaining and strengthening our commitment to customer service and community banking that got us where we are today.

Today, we're a $4,000,000,000 institution.

And more than 70 percent of our growth has been internal.

External growth remains a critical component of our strategy as well.

That's why I'm very excited about our upcoming merger with First Community Bank, located in Fairburn, Georgia.

This transaction, scheduled to close in June, expands our metropolitan Atlanta presence into the South-side market area, one of the fastest growing regions in metro Atlanta.

Metropolitan Atlanta with more than 4,100,000 residents was the second fastest growing metro area in the United States during the 1990s.

And that growth continues today.

We intend to leverage our existing metro Atlanta franchise to increase and strengthen our relationships with customers there.

With this acquisition, United Community Banks will have 23 full service banking offices in this market and assets exceeding $1,000,000,000.

We also opened a (inaudible) banking offices in Athens, Tennessee and Cartersville, Georgia.

Cartersville is located in Bartow County, which is part of the fast growing Atlanta MSAs.

Our new Cartersville office will be an expansion of our existing Adairsville bank.

The President and his management team bring many years of banking experience to these markets and he is a life-long resident of the area.

We're expanding within the County because of the success of the existing bank and the need for another office to take advantage of the expanding business opportunities in Bartow County.

Athens is located in McMinn County, Tennessee, along Interstate 75, halfway between Knoxville and Chattanooga and borders our existing franchise.

This market offers excellent expansion opportunities.

And we expect this office to be a valuable contributor as part of United East Tennessee Bank.

Athens is a great place to both live and work.

This office will be run by a banker who brings over 20 years of banking experience within this community.

We are very excited about the growth prospects for both of these new banking offices.

So, looking ahead, United Community Banks' strategy is on target to continue achieving earnings per share growth within our long-term goal of 12 percent to 15 percent.

For 2004, with this ongoing low-interest rate environment, we are comfortable with the current earnings consensus, which is at the lower end of that range.

We're on target to maintain our core loan growth in the 10 percent to 14 percent range and our margin at the 4 percent level through 2004.

We're on target to deliver the 18 percent return on tangible equities.

We're on target to blend strong internal growth with selective external growth.

And to do it, most importantly, by maintaining the strengths, strategies and values that got us where we are today.

Strengths, strategies and values built from our commitment to provide the highest level of service to our customers and to provide superior value to our shareholders.

I'm convinced that providing the highest level of service to our customers is really the key to providing the highest level of value to our shareholders.

Thank you for your interest in this company.

Now, I would like our moderator to open the lines for your questions.

Thank you, Mr. Tallent.

The question and answer session will begin at this time. [OPERATOR INSTRUCTIONS] Your questions will be taken in the order that they are received.

Please stand by for your first question.

Our first question comes from Christopher Marinac with FIG Partners.

Please state your question.

Thanks.

Good morning, Jimmy and Rex.

Good morning, Chris.

Good morning, Chris.

I wanted to ask you about what you felt was the pace of loan growth throughout the quarter.

Particularly, was there any difference between how you started the quarter and how you ended the quarter in terms of the overall acceleration or the reverse?

Chris, it's Jim.

Rather consistent.

Our loan growth continues to be healthy.

It's spread all over our markets.

We did not see, really, any peaks or valleys.

Been rather consistent all three months.

OK.

And then, Jimmy, from the standpoint of acquisitions in the future, you know, what is your sense, I guess, in terms of pricing from discussions you had and, you know, since the last quarter?

And any thoughts on, you know, is it more interesting to do deals today or would you - less interested?

Well, the pricing obviously is, as you get into these high-growth markets are, you know, very expensive.

Our strategy has always been for us to find a real partnership arrangement.

People that - it's not an end-play for them.

It's some - it's a - it's a bank that really wants to join in with a larger company and enjoy the strengths and the resources of that, which allows them to grow their bank but also to grow more value.

As far as just the general consensus, you know, we're constantly talking to people.

Relationships that have been established over many, many years.

And certainly, if the interest rates stayed low and margins continue to stay under the pressures that they are, I think that there probably will be more folks interested in merging.

OK.

Great.

Thanks, guys.

Thank you.

Thank you.

Our next question comes from John Pandtle with Raymond James & Association.

Please state your question.

Good morning, gentlemen.

Good morning, John.

Good morning, John.

My question, Rex - and I apologize if I missed this - when you were talking about your interest rate sensitivity, can you give us a sense for what percentage of loan portfolio is variable rate?

And then, you know, what the Dollar amount is of the loans that are already at (inaudible) that, perhaps, would not, you know, re-price higher initially?

Right.

As I indicated in the call, our Prime Daily (ph) loans at quarter-end is about $1,600,000,000, John.

OK.

Slightly over 50 percent of the portfolio.

And that compared to about $1,100,000,000 a year ago.

Looking at our floors.

Our floors are less than 10 percent of the portfolio.

It's about $260,000,000 at quarter-end.

And with the first 50 basis points rise and a Fed (ph) increase, we'd see that drop to about $100,000,000.

So, we're not too sensitive on that side either, with the floors.

OK.

And then, Jimmy, in terms of acquisition pricing, the deal that you have pending south of Atlanta - the, you know, the deal evaluation was pretty reasonable.

I was just wondering if you can give us any insight there.

Is it related to something specific with that bank?

Or is it, you know, related to your model in terms of how you approach acquisition candidates?

John, I would respond by saying, our model - I've known Bob Fuller and (inaudible) for many years.

And they have been interested in this company.

They like the way that we do business.

They like the way that we structure our company because we don't destroy what we're actually acquiring.

This gives them a real beach-head (ph) there on the south side.

You know, we've got a loan production office there in Fayette County.

We will also be able to assist them in bringing, I think, stronger lenders and maybe, more resourceful bankers into that bank.

And be able to maybe, spread that even further across the south part of Atlanta.

But, to specifically answer your question, what they told me was, they like what we stand for, they like our culture and they like the way we manage the company.

OK.

Very good.

Thank you.

Thank you.

Our next question comes from Kevin Reynolds from Morgan Keegan.

Please state your question.

Good morning, gentlemen.

Good morning, Kevin.

Good morning, Kevin.

Quick question, again.

I want - just want to follow up on your margin sensitivity in a rising great environment and, kind of, tackle it from both sides.

And then, maybe, the easiest way for you guys to handle this, to just update us on the interest rate risk model at quarter-end.

I may have missed that just a little bit earlier, but could you give me that?

Rex, you want to handle that one?

Yes.

Kevin, I indicated in the call, we're about 3 percent asset sensitive at quarter-end and that has increased from about 1.5 percent.

And that is driven, primarily with our floating rate, our prime phase loans that have been increasing added.

Also, Prime Daily loans in the first quarter were, I mean, most of the loans in the first quarter were Prime Daily loans.

So, that was adding to the interest rate sensitivity.

So, we're about 3 percent as of quarter-end.

OK.

And I'm sorry I didn't get that.

I was hopping between calls.

The other question I have for you is, you know, you talked about your acquisitions within your core footprint there in Georgia.

Is there anything else that, outside what is your existing footprint today, that starts to look a bit attractive, going forward?

Kevin, within our universe - and you probably have seen that chart that we have used in that eastern Tennessee card or western North Carolina and north Georgia, the coast of Georgia and then, possibly, the western tilt there in South Carolina.

That's basically, our universe.

We certainly would like to add on to that with the appropriate banks and the appropriate opportunities, but more importantly, as we find those bankers that, you know, believe in our culture and service ethics, that's how we would actually expand.

You're not going to see us jump way down in the middle of Florida or way over, you know, in mid-Alabama.

That's just not the way we do business.

That and the fact (inaudible) is where you'll see ongoing expansion of United.

OK, thanks lot.

Thank you.

Our next question comes from Bill McCrystal (ph) with (inaudible).

Please state your question.

Good morning Jimmy, Rex.

Good morning Bill.

Good morning Bill.

I just want to focus little bit on the deposit growth.

You spoke at length about the core deposit.

Let me just give you my thoughts here and then, if you could comment.

Notice the time category is up significantly over the year-end - 12 percent.

And looking back over the quarter as your average loan to deposit ratio has been creeping up, I wonder whether generally, specifically, you could talk about your internal modeling for loan deposit ratio and talk a little bit about what was behind the growth and the time deposits?

Are you finding that you're needing to start to get out and market more for deposits in that area?

Let me start with that and then Rex can come in behind me there, Bill.

As far as our overall deposit growth and certainly on the certificates of deposits, we're in markets that have lots of population growth and of course, fortunately with that becomes deposit growth.

When you get deposit processes as low as they are, certainly the certificates of deposits of where people are most sensitive to, just increase their earnings and certainly we - that category has increased but what we've been able to do, we wanted to refocus the 1,400 employees of this company on core deposit growth.

And this initiative that we actually began in mid-January, so we're only into it 75 days.

And as Rex said, our number of accounts are up 50 percent over a year ago, and that is beginning to really pay off on the core deposit growth because first quarter we actually saw a core deposit growth of over a $30,000,000.

And really what we're also experiencing as those accounts open, there's a little bit of a trailing period before the balances actually come aboard.

So we're optimistic about that and certainly we have not only the employees but the referral friend from a customer base and believe me, that works.

Also, to even our Board of Directors, all 183 are really focused on growing core deposits.

So, Rex, I'll let you add on to that if you'd like.

I think I'll just add briefly.

We commented in prior calls of switching our wholesale funding and trying to drive core deposit as Jimmy's indicated.

And we're seeing that - seeing some positive results of that is - as Jimmy noted in the first quarter, as well as the focus not only on the core deposits but again continuing to grow the time category also and build that relationship with our customers and our markets.

So, I think you'll see that probably, over the next few quarters, continue to increase more in our internal funding and less wholesale.

OK.

So you don't have any specific guidelines in terms of that particular ratio on a loan deposit?

I think where we're running it now, is we're probably like to keep it, Bill, from that standpoint.

And continue to, I think again expand our deposit base - our core base, both in CDs and other categories that keep that around that same level right now.

Again, we still see very strong, as Jimmy indicated, strong loan growths in our markets and again, expect that to continue in the 10 to 14 percent and the challenges of keeping that - our own deposit base growing at that rate also.

OK.

And just in general, what is the market like in your - what is it like in your market in terms of the pricing in your wholesale funding?

Is it really competitive yet aggressive, so on ...

In the wholesale ...

On the certificate deposits, you know it's competitive Bill but it's everywhere.

We have been very sensitive to the fact that we know we can grow our deposits.

I mean, because it's still right to drill it in any of the markets.

And anytime we want to turn the switch up a little bit and increase the right, we can bring in deposits.

But in the overall scope of it, we've been able to balance that with wholesale funding, maintaining those core customer relationship where we do not have to pay up on certificates of deposits.

But at the same time, again, where our overall focus is to grow internally that core deposit base.

So, you know, as Rex said, the loan to deposit ratio, right now we feel reasonably comfortable, we could change that very quickly, but we also want to manage our margin as well.

OK, fair enough, thank you.

Thank you.

Our next question comes from Sam Koldwon (ph) with KBW.

Please state your question.

Good morning Jimmy, good morning Rex.

Good morning Sam.

Good morning Sam.

Hi, I had a question regarding - I believe it was Jimmy, he said in his opening comments that loan growth just for the first quarter was 131,000,000.

Could you provide me a breakdown of that by geography and also by type just for the first quarter?

I can answer that for you Sam.

If you look at our quarter growth with respect to geographic, we're up 56,000,000 in North Carolina, 19,000,000 in Western Atlanta, 38,000,000 in Western North Carolina, 12,000,000 in Coastal Georgia, and 6,000,000 in East Tennessee.

Looking at the categories - construction of land development loans increased 66,000,000, commercial grew by 38,000,000, and residential mortgages were up 29,000,000.

Great.

And one other question - what were the mortgage originations in the quarter?

In the quarter - for the first quarter, we had about 55,000,000 in the first quarter.

Great, thank you.

Thank you.

Your next question comes from Jefferson Haroldson (ph) with KBW.

Please state your question.

Thanks.

If I can just follow up on Sam's - you guys have had a lot of success over the last couple of years in making key hirers, key lender hirers from Sun Trust and DDNT (ph).

Can you comment on any recent vendor hirers or key people hirers or can you comment on whether there is - are you talking to people on those lines?

And finally, is a base like Sun Trust and DDNT does OK, (inaudible) in your market?

And (inaudible) the flow or increase the competition for you?

Jefferson (ph), let me answer the last part of your question first.

You know, as far as the large regional buyings, they have been, in our estimation, pretty consistent.

They've not really risen to a point that - that has made us intensify our efforts from a competitive standpoint.

I guess a better way to say that is they did fairly solid.

Well, what we do see is a lot of the historic - the noble buyings, where they are paying exorbitant rates and charging very low rates, from our overall competitive environment.

I'm always in the people business and always looking for good bikers and certainly there is always ongoing conversation going on and we will have a really solid biker that will be joining us in the next 30 days that will actually be involved in one of our larger bikes here.

So, we're excited about that but we also are excited about the business model that we've been so fortunate to grow and develop over the years because to our benefit, it has attracted the kind of quality, passionate bikers that have built this company to where it is today.

Thank you very much.

Thank you.

Ladies and gentlemen, as a reminder, should you have a question, please press *1 at this time.

If there are no further questions, I will turn the conference back to Jimmy Tallent.

Well, let me thank you for your interest in United Community Banks.

We all certainly look forward to discussing the next quarter with you in July and certainly hope all of you have a nice day.

Thank you.

Mr. Tallent I have one more question.

OK.

All right.

I'm sorry; she actually just withdrew her question.

OK.

Ladies and gentlemen, if you wish to access the Web cast for this call, you can visit the company's Web site at www.ucbi.com.

This concludes our conference for today.

Thank you all for participating and have a nice day.

All parties may now disconnect.