United Community Banks Inc (UCBIO) 2007 Q1 法說會逐字稿

Good morning, and welcome the United Community Banks' first-quarter 2007 earnings conference call.

Hosting the call today is Jimmy Tallent, President and Chief Executive Officer of United Community Banks; and Rex Schuette, Chief Financial Officer.

Please be aware that during the call, Mr.

Tallent and Mr.

Schuette may make forward-looking statements about the United Community Banks.

Any forward-looking statements made today 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 in the SEC included on their website, www.UCBI.com.

And now, we'll begin the conference call with Jimmy Tallent, President and Chief Executive Officer of United Community Banks.

Mr.

Tallent?

Thank you and good morning.

I am pleased to report strong year-over-year performance during the first quarter of 2007.

We achieved record earnings while continuing to enhance the franchise with the opening of two de novo offices and the signing of an agreement for a key strategic acquisition in metro Atlanta.

I will discuss the acquisition in my closing comments.

Rex will comment on our earnings in more detail in just a few moments, but I want to take some time now to review a few highlights in the first quarter.

Net interest revenue rose 16% from the first quarter of 2006.

This reflects a 12% increase in loans excluding those loans that were obtained through acquisitions.

The loan growth was entirely funded by a 17% increase in customer deposits -- again, excluding those deposits that were obtained through acquisitions.

Fee revenue rose a strong 22%, reflecting increases in every category.

Total assets rose to $7.2 billion, up 18% from a year ago.

Net income was a record $19.3 million, up 21%.

And earnings per share was $0.44, up 13% from a year ago.

During the first quarter, we experienced slower loan growth than usual, resulting in a linked-quarter increase in loans of about $26 million or 2% on an annualized basis.

Now, that's quite a bit less than we are accustomed to reporting.

And I want to take just a moment to comment.

Although housing in our markets continues to sell and prices remained stable, there has been some buildup of lot inventory, particularly in the acquisition and development projects.

This has caused some slowing in loan demand in that area.

Additionally, we have tightened our internal underwriting standards, and are taking a wait-and-see position until we have more clear understanding of where the market is heading.

Added to this intentional slowing of loan growth were some large paydowns in the first quarter.

Some were delayed from the fourth quarter, while others resulted from the sale of customer businesses and construction developments and irrational competitive pricing.

We also moved out of some less desirable credits as we continue our focus on strong credit quality.

Non-performing assets totaled $14.3 million at the end of the first quarter or 20 basis points as a percentage of total assets.

This compares with 19 basis points at year-end and 14 a year ago.

Non-performing assets throughout most of 2006 were at an unsustainable low level.

And at this point, we don't believe the slight increase in the first quarter indicates a negative trend.

It is still early in the year, and we remain optimistic about the outlook for our loan growth.

Demographics are favorable and economic conditions are solid across all of our markets, especially in metro Atlanta, where job growth continues at a very strong pace.

Still, in light of the first-quarter slowdown, and to be conservative for the remainder of 2007, we have lowered our loan growth target range to between 6 and 10%.

We continue to fund loan growth with core customer deposits during the first quarter, adding $137 million in transactions, savings, and money market accounts, while letting some of the more expensive time deposits run off.

An increasing portion of the deposit growth is coming from de novo expansion into growing populations and business centers in and around our existing markets.

During the first quarter, we opened a second office in Cleveland, Tennessee, which is in the thriving industrial corridor along I-75 between Knoxville and Chattanooga.

You may recall that we entered Cleveland in August of last year by building around two well-known and respected bankers there.

In a little more than six months, they have grown their bank to $21 million in loans and $51 million in deposits.

And now they've opened a second Cleveland location which is the 102nd banking office for United Community Banks overall.

We also completed construction and opened a de novo office that is located in the southern part of Forsyth County in northern metro Atlanta.

It is led by a highly respected 20-year veteran of that market who joined us in mid-2005.

Between 2000 and 2015, the population in Forsyth County is expected to increase from 98,000 to 233,000, or 137%.

That makes it the fastest-growing county in Georgia, and one of the fastest in the United States.

We now have three locations in Forsyth County, all located along the Georgia 400 corridor, which is a major focal point of metro Atlanta's expansion and prosperity.

Let me also mention that we converted a commercial loan office in Blowing Rock, North Carolina to a full-service banking location during the quarter.

Blowing Rock is an affluent resort town along the Blue Ridge Parkway, and was named a favorite mountain destination by Southern Living magazine in 2006.

Over the past 24 months, we have added a total of 16 de novo locations.

The de novo component of our balanced growth strategy will continue over the long-term.

For the short-term, however, we will take a more measured approach to adding offices and related expenses while we monitor trends in loan growth.

We announced yesterday a significant addition to our management team in David Shearrow, our new Executive Vice President of Risk Management.

David has joined us from a large regional bank where he was Executive Vice President and Group Senior Credit Officer.

He succeeds the retiring Ray Williams, who has led the risk management and credit teams for five years.

And he is a person of strong credentials and impeccable character.

We are fortunate to have a person of David's experience and stature to step into this key position.

I will also mention one other recent event.

United has been selected by Standard and Poor's to be included in their SmallCap 600 Index.

We view this as a statement of confidence in both our long history of consistent profitability and our commitment to building shareholder value.

With that, I will now ask Rex to review the first-quarter numbers in more detail.

Thanks, Jimmy.

During the first quarter, net income was up 21% or $3.3 million compared to the first quarter of 2006, and diluted earnings per share increased 13% to $0.44.

The earnings increase continued to be driven by strong revenue growth, including both net interest revenue and fee revenue.

Taxable equivalent net interest revenue totaled $65.1 million for the first quarter.

This is up $9.1 million or 16% from the first quarter of 2006, and was driven primarily by our loan growth of $818 million.

All of this loan growth was funded by customer deposits.

Net interest margin was 3.99% for the first quarter of 2007 and for the fourth quarter of 2006 compared with 4.06% for the first quarter of 2006.

So we maintained our margin on a linked quarter basis, but fell slightly year-over-year as expected.

Net interest revenue increased with the growth in loans and deposits.

We feel our margin has stabilized at the 4% level and that growth in low-cost [VDA] and other transaction accounts should help to offset the effect of pricing competition on other deposit products.

Total loans increased 18% year-over-year, with Southern National adding $267 million in the fourth quarter.

Excluding the Southern National acquisition and the two branches acquired in North Carolina in the third quarter of 2006, core loan growth was 12% year-over-year.

On a linked-quarter basis, we saw a 2% increase that Jimmy explained earlier.

Deposits increased $1.1 billion from the first quarter of 2006, including $286 million in the fourth quarter from Southern National and $38 million from the two acquired North Carolina branches in the third quarter.

I will now provide additional detail on the $818 million increase in loans compared to a year ago first by geographic region.

North Georgia had growth of $216 million.

Metro Atlanta increased $409 million, including the $267 million from Southern National Bank.

Western North Carolina had growth of $92 million, including $8 million from the purchase of the two North Carolina banking offices.

Coastal Georgia growth was 52 million, and East Tennessee increased 49 million.

Looking at this regional growth on a linked-quarter basis, North Georgia was down $13 million for the quarter.

Metro Atlanta was down $1 million.

Western North Carolina increased $9 million.

Coastal Georgia had growth of $15 million.

And East Tennessee grew $16 million.

Looking at year-over-year growth by loan category, construction and land development loans grew by $480 million, bringing the total to $2.3 billion.

Commercial loans increased by $203 million to $1.5 billion.

Residential mortgages increased by $127 million to $1.4 billion.

And consumer loans increased by $8 million.

Looking at the loan categories on a linked-quarter basis, construction and land development loans increased by $3 million.

Commercial loans increased by $16 million.

Residential mortgages increased by $16 million.

And consumer loans decreased by $9 million.

Next, let me update you on the interest rate sensitivity of our balance sheet at quarter end.

As noted in the fourth quarter conference call, we took several steps in the third quarter to reduce our exposure to a lower interest rate environment.

At quarter end, our interest rate sensitivity reflects a 1.5% increase in net interest revenue over the next 12 months based on a 200 basis point ramp up of interest rates.

This is down from 3.3% a year ago and 1.9% at year-end.

Also, our interest rate sensitivity model indicates that a 200 basis point ramp-down in interest rates would cause a 30 basis point decrease in net interest revenue as compared to a 70 basis point decrease last quarter and a 520 basis point or 5.2% decrease a year ago.

At quarter end and year end, total prime daily loans were $3.1 billion as compared to $2.6 billion at March of 2006.

The investment securities portfolio effective duration was 2.3 years at quarter end as compared to 2.7 years at December 2006 and 2.6 years at March 2006.

Average life was 2.9 years at quarter end as compared to 3.8 years at December 2006 and 3.6 years a year ago.

Fee revenue remains strong across all categories.

Total fee revenue of $14.4 million was up $2.6 million or 22% from $11.8 million for the first quarter of 2006.

Service charges and fees on deposit accounts increased 14% or $900,000 to $7.3 million primarily due to the growth in transaction and new accounts resulting from our core deposit program and higher ATM and debit card usage fees.

Mortgage fees grew 47% or $710,000 to $2.2 million due to higher volume of closed loans and favorable pricing of mortgage products.

During the first quarter of 2007, we closed $109 million in loans compared to $77 million a year ago.

Taking a look at operating expenses, total expenses were 44.8 million, up 6.4 million or 17% from the first quarter of 2006.

The acquisition of Southern National added approximately $1.2 million in expenses.

Salary and employee benefit costs of 28.3 million for the quarter were up $4.4 million or 19% from the first quarter of 2006.

This was primarily due to the increase in staff to support our de novo expansion and acquisitions, as well as business growth and rising health-care costs.

At year end, we had total staff of 1,950, up 215 or 12% from a year ago.

Of that increase, 109 staff members were related to the two acquisitions and the seven de novo offices that were opened over the past 12 months.

Communications and equipment costs of $3.8 million increased 13% or 436,000 from the first quarter of 2006.

The increase was due to technology upgrades in investments and equipment necessary to support our business growth and additional banking offices.

Occupancy expense of $3.2 million increased $259,000 or 9% due to the costs of operating additional banking offices.

Advertising and public relations expense and postage, printing and supplies expense increased 7% and 9%, respectively.

The increases were due to our business growth, marketing campaigns for our de novo offices and recent acquisitions, as well as other marketing campaigns that generate core deposits.

Professional fees of $1.5 million increased 27% or $318,000, which reflects higher legal fees and the costs of various corporate initiatives.

And other operating expenses of $3.8 million were up 600,000 or 19% reflecting higher loan workout and ATM expenses as well as business growth.

Our operating efficiency ratio of 56.56% for the quarter is within our long-term goal of 56 to 58%.

As always, we continue to focus on controlling expenses while balancing growth and de novo opportunities throughout our markets.

In light of the slower pace of loan growth, we will focus additional attention to control of marketing and other discretionary costs.

Now let's look at credit quality.

The first-quarter provision for loan losses was $3.7 million, up $200,000 from a year earlier and equal to the fourth quarter of 2006.

Net charge-offs for the quarter were $1.5 million compared to $1.9 million for the fourth quarter of 2006 and $1.2 million a year ago.

Net charge-offs to average loans are 11 basis points for the first quarter of 2007 and 2006, and down from 15 basis points for the fourth quarter of 2006.

Non-performing assets at quarter end were $14.3 million compared with $13.7 million at year end and $8.4 million a year ago.

At quarter end, non-performing assets included $12.3 million of non-performing loans and $2 million of OREO.

There were no loans 90 days past due and accruing interest at quarter end.

Non-performing assets as a percentage of total assets were 20 basis points at quarter end compared to 19 basis points at year-end and 14 basis points a year ago.

The current level of non-performing assets is at the lower end of our long-term historic range of 20 to 35 basis points.

During most of last year, we were significantly below this range.

We do expect some volatility in the future, and likely will return to more normal levels within our historic range during 2007 and 2008.

Turning to capital at quarter end, all of our ratios were about our internal guidelines, which are 100 basis points above the regulatory well capitalized level.

This concludes my comments.

And I will now turn the call back over to Jimmy.

Thank you, Rex.

We continue to be optimistic in a strong economy and exceptional markets.

As we entered the second quarter, there are a number of positive developments.

First, we saw solid core deposit growth in the first quarter with particular strength in demand deposit and NOW accounts.

We will continue to focus on growing core customer deposits to lower our overall cost of funds and generate additional fee revenue.

Second, our de novo locations continue to improve in profitability.

We have some discretion as to the timing of future de novos, and may delay those not already committed to.

For those de novos that we have announced and are in process, the staff members are already onboard, and their cost is included in our first-quarter results.

Growth at these new locations will therefore add revenue without a proportionate increase in expenses.

Third, we announced during the first quarter an agreement to acquire First Bank of the South in metro Atlanta.

First Bank of the South's primary market is Gwinnett County, which is the second-largest county in the Atlanta MSA and has excellent demographics in terms of median household income and population growth.

When the acquisition is completed later this quarter, we will have fulfilled our goal of completely encircling Atlanta, one of the best banking markets in the countries.

The First Bank team members bring exceptional leadership and experience in this region.

They also bring strong commercial and industrial lending expertise that we can leverage across our entire metro Atlanta franchise, providing another growth avenue and an opportunity to better diversify our loan portfolio.

Also, the hiring of David Shearrow as EVP of risk management dovetails nicely with this opportunity, especially with David's expertise in business banking, real estate, and commercial lending.

Now let me turn to our guidance for 2007.

We still expect earnings per share growth to the within 12 to 15%, but at the lower end of that target range.

Keep in mind that this is on top of last year's 16% growth, and we are still within our desired range and earlier earnings guidance.

As I mentioned earlier, we believe core loan growth will be 6 to 10%.

We will proceed with caution, and will not grow loans by sacrificing credit quality.

We expect our net interest margin to stabilize at the 4% level consistent with our earlier guidance.

This outlook assumes stable economic and rate environment and continued strong credit quality.

As we look toward fulfilling our primary goal of producing double-digit growth and earnings per share through the remainder of 2007, we will focus on growing quality loans, growing core deposits, controlling discretionary expenses, moving de novo locations to earlier profitability, and preserving credit quality.

We remain committed to excellent customer service under our community bank operating model.

It is a model that comes naturally to our employees and that has served our customers and shareholders extremely well.

We're building our franchise around respected bankers and citizens in excellent markets.

We will continue to add the right people in the right markets when opportunities are available and the timing is appropriate.

Our strategy is one of excellent service that drives performance, that enables expansion in a unique and dynamic footprint.

The goal of this strategy and of everything that we do is ultimately to increase the value of our shareholders' investment.

I'll now open the call to your questions.

(OPERATOR INSTRUCTIONS).

Kevin Fitzsimmons, Sandler O'Neill.

Just two questions.

Jimmy, on your earlier comments about the reasons behind the slower pace of growth this quarter, if you could just roughly estimate -- if you were to take the whole slowdown in the loan growth and you looked at those -- I think it was three primary reasons you cited -- the buildup of lot inventories in A&D, and then the tightening of underwriting criteria and then the larger piece of paydowns.

If you were to look at those three, what kind of rough percentage would those have contributed to the slowdown?

And then looking forward, it seems like you're kind of estimating the growth to improve up toward that 6 -- to get us up to that 6 to 10%.

Where do you see each of those reasons?

What would they do over the next couple of quarters?

Sure.

Kevin, let me first kind of dissect the first quarter -- and I think gives a little more clarity to our loan growth.

First, we had two credits that actually paid off the first quarter that was scheduled to close in the fourth quarter of last year.

These two credits were about $25 million, and certainly had an impact.

A second area was where we had three credits that, again, were somewhat unusual that we chose either not to make or allowed to leave the bank because of what we think is just totally irrational pricing somewhere in the same dollar amount.

Again, we have seen some self-discipline being exercised by our developers with a buildup of inventory.

I think it's certainly an overall economic slowdown.

And I think, too, one thing I would want to point out is our underwriting on our A&D and construction -- we started this back toward the latter part of '06 of being even more restrictive.

We're looking for more equity from our borrowers.

We're looking for more liquidity and understanding their complete relationship -- certainly, their marketing capabilities.

But we still remain very optimistic because we are embedded in some of the best growth markets in the country.

If I chose a number, getting these unusual events, I think we would see our loan growth somewhere in that 6 to 7% range for the first quarter.

In April, thus far, we are cautiously optimistic.

We have seen some of our loan growth come back.

But again, it's still early in the second quarter.

But I would say this, that I would hope that our analysts as well as our investors in particular will appreciate the fact that if we need to curtail loan growth for a few quarters in order to avoid future loan problems, that's exactly what we would plan on doing.

Okay, great.

And secondly, Rex, could you just mention -- you may have referred to this.

And if you did, I apologize.

The loan and deposit growth and growth in fee revenues and expenses linked quarter -- if you excluded Southern, is that an easy adjustment to make?

Probably on the loan numbers, we have disclosed that or talked about it on the call with respect to the amount of loans and deposits.

Kevin, it might be a little more difficult as you get into some of the detail with respect their P&L, because we break away their balance sheet and we have removed investment securities.

That flows the parent company.

So it's probably not a true one-on-one comparison.

I did note on there, if you missed it, with respect to expenses, there was about $1.2 million of expenses related to Southern in the quarter on a linked-quarter basis, incremental.

The fee revenue probably wouldn't be that material of a number in fee revenue in particular when you look at fee revenue.

Then you get into net interest revenue, and it really is just the balances that are embedded in there for one month versus three months.

I probably come back on that if you need a little more detail.

(multiple speakers) we have the loan that I talked about a little bit earlier.

No, that's fine.

Jennifer Demba, SunTrust Robinson Humphrey.

Two questions.

And Jimmy, I'm sorry; I missed the very beginning of your opening comments.

So if you covered this, I apologize.

One, when you talk about loan demand slowing, has it been slower in metro Atlanta versus north Georgia or North Carolina?

Or can you characterize that geographically?

And my second question is you said you'd definitely think about slowing down your de novo growth.

What branches are you committed to opening this year?

Let me answer the loan question first.

We did see a reduction on a linked quarter in metro Atlanta -- just a very small reduction of $1 million; $13 million reduction, Jennifer, in north Georgia.

North Carolina, Tennessee, and coastal Georgia all had very positive numbers.

So that's kind of what happened the first quarter given those particular regions.

In regards to our de novos, what we have committed in 2007 is the office that we just opened actually was under construction in 2006.

The officer that runs that office has been with us since '05.

And that's in what we call midway, which is the south Forsyth County.

That's open, operating, and doing very, very nicely.

The other three that we plan to open this year that we have committed, we have people onboard, which is embedded into the expenses numbers already, is one additional location in north Hall County in the Lula area; a third location in Savannah -- that probably will be third quarter -- the construction is about 50% underway; and then the third location for this year would be there in Ball Ground in Cherokee County.

So that's what we're focused on as far as 2007 de novo initiatives.

(multiple speakers) add Jimmy's comments about the geographic breakdown with North Georgia being down $13 million -- that was primarily related to the one loan Jimmy was talking about earlier on some irrational pricing.

We're not going to match the fixed rates of that impact -- that region from that standpoint.

And again, looking at it, if you aggregate those, kind of the unusual prepayments, our growth rate would have been probably 6 or 7% on a linked quarter basis, pretty well consistent with the outlook that we have for the balance of the year, 6 to 10.

John Pandtle, Raymond James.

Question for you on deposit pricing competition.

With the market slowdown from a loan growth standpoint, are you seeing that reduce some of the pressure on deposit rates?

And then also, I was hoping you could review recent de novo activity, recent maybe being the last 18 months, and kind of where those are performing relative to kind of a mature target level, thinking about how much growth you still expect to get from pre-existing de novos?

John, in regards to the deposit pricing, we probably have seen a little bit of less intensity there still, that one-off, new chartered bank that runs what we call the blue light special.

But we have seen that being a little bit more rational today.

What we have seen is just a handful of sizable credits and these in all three cases large regional banks that came in and made a very low, long-term fixed rate on those credits.

And we chose not to participate and allowed those to runoff.

As far as our de novos, and I appreciate the question, John -- first of all, our de novo strategy has always been to reinvest when we can afford it for the future, and exactly what we have been doing over the last several years.

If you look at 2005, when we opened seven new de novos, those seven today has produced $370 million in loans, $220 million in deposits.

If you look at those in aggregate, they are now positive to contributing to the earnings.

Now, not all of them are profitable, but in aggregate, they are.

2006 de novos, we had eight.

And those in 2006 have contributed $127 million in loans, $150 million in deposits.

And certainly, those continue to have a negative impact on earnings as they are continuing to grow out of that.

We feel there's a lot of capacity for growth there.

We have even, I guess you would say, reinvigorated our focused on accelerating breakeven with our de novos and then to the profitability -- we started that last year.

We're very encouraged by what we are seeing.

And that process as we're meeting with the CEO's and the branch managers and being able to give them every 30 days exactly what they have achieved, what we need to achieve, and a strong focus.

So we're pretty excited about that.

Again, with the strategy of reinvesting into the future through the de novos, I think we really will see some of that pay off in 2007, assuming our loan growth continues to stay in that 6 to 10% range.

(OPERATOR INSTRUCTIONS).

Christopher Marinac, FIG Partners.

I wanted to ask about some of the delinquencies that you might be seeing underneath the surface on construction lending, whether it be in metro Atlanta or elsewhere in the footprint -- and not just of your own portfolio, but elsewhere with your competitors.

Are the loss expectations any greater than you originally thought, or do you think that as the cycle goes on, the losses will be relatively muted?

Well, let me talk about our credit quality specifically.

And ours continues to remain very solid with low levels of charge-offs and NPAs.

Our past dues continue to be at a relatively low level.

There was a spike in fourth quarter.

And that was a single credit that was in the process of being sold, or the property was that ran past due.

Long story short, that credit had been completely paid off.

So our past due level remains in a very acceptable range.

We continue to be proactive at managing past dues.

We're very aggressive in coming up with a remedy when we identify a loan that we feel is not going to be able to make it long-term.

As I've said many times, we always have a handful of credits that we're dealing with.

We probably have to see a little bit of slippage in a handful as we are, in today's environment -- certainly given where the additional interest cost to some of the borrowers and how that has impacted their P&L.

We continue to manage our OREO portfolio.

We had about $2 million in OREO at the end of the quarter.

Actually, over 70% of that today is either sold or under contract.

So all of those kind of things move out.

But as far as the overall portfolio, we still feel very, very good about that.

There will be a one-off here and there.

We have been I think very diligent in maintaining our NPAs and charge-offs truly below our stated range.

I looked back the other day on some numbers.

I think 2002, we had $8 million in NPAs.

2006, we've added $4 billion to the Company.

We have $14 million in NPAs.

Certainly, we're cautiously optimistic.

If we see credits that we feel need -- that has weakness, and we think we need to move quickly, then we will do that.

You can always see lumpiness in our NPAs.

But today, we still feel very, very good about our environment, our market, the population growth within those markets and the quality of our credit portfolio.

Great, Jim.

That's helpful.

And I guess just a follow-up -- the relative strength that we saw in coastal Georgia and eastern Tennessee -- is it fair for us to take away that perhaps the pricing and/or credit quality is incrementally better there than in the rest of the footprint?

No, I wouldn't say that, Chris.

I think we have been able to add some very solid bankers and lenders.

As you know, we always focus on trying to find the best folks in every market.

We have been able to add to that stable of talent.

And I think that's what you are seeing relative to that growth.

But those markets still are doing very well.

Jefferson Harralson, KBW.

I wanted to ask you a question about Gwinnett Banking Company.

I don't know if you've seen the numbers for them yet, what their loan growth looks like -- is there, is including that acquisition integrated into your 6 to 10% loan growth guidance?

That would be excluded from the 6 to 10% loan guidance -- [I mean] from an absolute number coming in.

Once they're in, we're expecting their growth to that same range also.

They have seen some slowness in their markets -- again, a focus on construction, lending -- and again, but their C&I is a little stronger.

But again, that would be within the overall guidance, Jefferson.

Peyton Green, FTN Midwest Securities.

Yes, Jimmy, I was wondering if you could comment a little bit on the M&A landscape, and if conditions are maybe moving your way in terms of pricing at large?

And then secondly, are you all seeing any bit of the credit spread that's kind of evaporated over the past two or three years come back into loan pricing?

Well, as far as the credit spread, Peyton, that answer would be no.

We still see that competitive.

I think if we continue in the environment of slower loan growth, it may even intensify.

Relative to the M&A landscape, I suspect that is beginning to reduce to a more normal level relative to pricing.

I know that there's probably a lot of banks there that would like to find a strategic partner.

Again, our growth so much of ours -- our whole focus is on organic growth.

We have been able to complete the circle with First Bank in metro Atlanta.

So we're basically finished in that market.

We'll continue to hammer away on an organic basis.

But our focus right now is truly just integrating, getting this bank closed, getting it integrated, being able to leverage some of their talent and skill in the C&I lending, and to continue to focus on organic growth.

That's how we create shareholder value.

If and when a candidate that would fit our criteria would come about relative to acquisition, then we certainly would take a look at it.

But I think our history shows we're very, very disciplined in our pricing.

This concludes the question-and-answer session.

I'll now turn the call over to management for closing remarks.

Thank you so much.

Once again, we thank all of you for joining us this morning.

We remain extremely optimistic with United Community Banks.

We couldn't be in better markets with better people that are committed to doing the right things -- and managing this Company in a balanced risk manner; but at the same time, our business model -- we're totally committed to it.

And it continues to perform day after day.

Certainly, this record performance for this quarter is a direct result of 2,000 employees who continue to rise to the challenge every day as we put that before them.

Again, we're very optimistic about the remainder of 2007, and we look forward to speaking to you next quarter.

Thank you.