United Community Banks, Inc.

Please be aware that during this call, forward-looking statements may be made by United Community Banks. Any forward-looking statements should be considered in light of risks and uncertainties described on page 4 of the company’s Form 10-K and other information provided by the company in its filings with the SEC and included on its website.

At this time, we will begin the conference call with Jimmy Tallent.

Good morning, everyone, and thank you for joining us for our earnings call. While we still have work ahead, we are pleased overall with the first quarter results.

Our core pre-tax, pre-credit earnings were $29.3 million, up $2.6 million from the fourth quarter and at the highest level since the fourth quarter of 2009. Net income was $11.5 million or $0.15 per share.

Two one-time revenue items increased net income by $1.8 million or $0.03 per share. Net charge-offs of $15.9 million slightly exceeded our $15 million provision for loan losses this quarter.

OREO expenses were $3.8 million, down significantly from the $9.3 million in the fourth quarter, though still elevated by historical standards. We had our second consecutive quarter of loan growth with $169 million in new commitments, of which $131 million were funded by March 31.

Core transaction deposits also grew by $151 million or 21% on an annualized basis. Non-interest-bearing demand deposits accounted for $108 million of this increase.

That is encouraging, especially in light of new service fees that became effective January 1, 2012. Non-performing assets were $162 million or 2.3% of total assets at quarter end.

Our net interest margin was 3.53%, and all of our capital ratios remained solid.

Now, David will provide detail on our credit performance and Rex will follow with details of our financial results. David?

Thank you, Jimmy and good morning. This quarter, we provided $15 million for loan losses, up from $14 million in the fourth quarter.

Net charge-offs were $15.9 million in the first quarter, down $30.1 million from last quarter. Our charge-offs were elevated last quarter due to the $25 million charge down of our largest loan relationship.

Non-performing assets increased $1.3 million from $160.3 million last quarter to $161.6 million this quarter. Given the slow pace of OREO sales in the quarter, we were pleased that our NPAs were essentially flat this quarter due to a decline in NPL inflow.

Non-performing assets included $129.7 million of non-performing loans and $31.9 million in foreclosed properties. The net inflow of new NPLs was $32.4 million this quarter compared to $46 million last quarter.

We had no accruing loans that were past due 90 days or more.

89 past dues for the accruing TDRs were 1.31% this quarter. The 30:89 day past due loans for the entire portfolio were 86 basis points, compared to 75 basis points last quarter.

The market to sell foreclosed properties remained challenging in the quarter due to a large number of sellers in what remains a very soft market.

We sold $8.6 million in foreclosed properties this quarter versus $20.7 million in the fourth quarter. Historically, the first quarter has been our slowest quarter for property sales, and typically we see a pickup in the spring and summer months.

In addition, we’re selling out of a much lower base of OREO inventory, which gives us less opportunity for higher dollar sale. I would expect to see some seasonal pickup in sales over the next 2 quarters, although sales will probably remain below the fourth quarter level.

Foreclosed property expense totaled $3.8 million this quarter compared to $9.3 million in the fourth quarter. The first quarter included $1.6 million for maintenance costs, $93,000 in net losses on sale, and $2.1 million in further write-downs on properties.

We continued to aggressively write down our remaining foreclosed properties this quarter in order to facilitate future sales and minimize potential losses.

At quarter end, foreclosed properties have been written down to 36% of their original unpaid principal balance. In addition, non-performing loans were written down to 71% of their unpaid principal balance.

As a reminder, our policy is to write down NPLs to 80% of current appraised value or lower. Let me now provide some detail on our portfolio by segment.

First, commercial loans. Our total commercial loan portfolio of $2.5 billion increased $36 million or 6% on an annualized basis over the fourth quarter.

Commercial real-estate loans were the primary driver of growth in the commercial portfolio this quarter. New loan commitments totaled $169 million this quarter and $115 million of the total were in commercial categories.

Owner-occupied real estate loans represented 77% of new commercial real-estate commitments this quarter, as we continue to focus on small business in our markets. Within our total commercial portfolio, we had $85.7 million of NPLs, up $7.1 million from last quarter.

Total commercial net charge-offs were $4.7 million for the first quarter compared to $27.2 million last quarter.

Commercial net charge-offs tied to our largest relationship represented $20.1 million last quarter. Moving on to our residential mortgage portfolio, we ended the quarter at $1.1 billion, flat from last quarter and down $56 million from a year ago.

In this portfolio, we had $18.7 million of NPL down $3.6 million from last quarter.

Net charge-offs were $5.4 million for the first quarter, down from $5.9 million last quarter. Home equity is included within our residential mortgage portfolio.

This portfolio, which totals $293.5 million, declined $6 million from last quarter. Home equity line usage was flat at 61% in the first quarter compared to last quarter.

Overall, residential mortgage early delinquency increased to 1.61% in the first quarter from 1.44% last quarter.

In summary, while high unemployment and property devaluation continue to impact the portfolio, residential mortgage remained stable with a slight improvement in credit. Our total residential construction portfolio of $436 million is down $12 million from the fourth quarter and down $114 million from a year ago.

The residential construction portfolio breaks down into $346 million in dirt loans, $57 million in spec houses, and $32 million in pre-sold houses.

Looking at credit quality, our residential construction portfolio had $24.3 million of NPLs, down $1.2 million from $25.5 million last quarter. Net charge-offs in this portfolio decreased to $5.3 million this quarter from $12 million last quarter.

And $4.2 million of net charge-offs last quarter were tied to the charge down of our largest relationship. At quarter end, our allowance for loan losses was $113.6 million or 2.75% of loans.

Our allowance coverage to non-performing loans was 88% compared to 90% last quarter.

In summary, we continue to make progress in working through our credit challenges. Net charge-offs, performing classified loans, and new NPL inflow declined this quarter.

Our NPAs have been written down to levels, which should allow for continued liquidation without significant losses. In addition, our past dues held steady again this quarter.

Looking ahead, we continue to expect our credit metrics to improve over the next several quarters, although not necessarily on a straight line. Total NPAs will continue to be impacted by our ability to liquidate foreclosed properties in this very challenging market, and new NPL inflow and net charge-offs could have some lumpiness.

While we continue to see some strengthening of our commercial and industrial base, the drag from real estate devaluation and unemployment continues to impact our markets. Nevertheless, based on our visibility today, overall credit trends are expected to gradually improve during 2012.

And with that, I’ll turn the call over to Rex.

Thank you, David and good morning. My comments today will refer to pages within our investor presentation and the tables included in our earnings release.

Core pre-tax, pre-credit earnings for the first quarter of 2012, as shown on Page 22 of the investor presentation, were $29.3 million and increased $2.6 million from last quarter and $7.2 million from a year ago. The increase from last quarter is due to a combination of higher fee revenue and lower operating expenses.

Net interest revenue of $58.9 million was down slightly from last quarter, and up $458,000 from a year ago. There were a number of positive and negative items that affected our margin for the first quarter.

As in the fourth quarter, prepayment acceleration lowered the yield on our investment securities portfolio due to a higher premium amortization, and the reinvestment yield on purchased securities was lower than the yield on securities they replaced.

Also, competition on loans and pricing pressures lowered the yield on our loan portfolio this quarter. We’re able to more than offset these 2 negative factors by continuing to lower deposit pricing, which overall was 60 basis points for the first quarter and down 10 basis points from the fourth quarter of 2011.

Additionally, we improved the yield on our short-term investments. Also, a more favorable mix of our non-interest bearing deposits contributed to lower the overall cost of funds.

The increase in the yield on short-term investments was due to a change in composition.

In the fourth quarter, we began entering into reverse repurchase agreements, including collateral swap transactions to enhance the yield on these excess funds. As a result, we’re able to increase the yield on short-term investments by 56 basis points from the fourth quarter of 2011.

The most encouraging items affecting our margin this quarter were the $151 million increase in core transaction deposits and $18 million increase in loans.

We view quality loan and core deposit growth as a key to growing net interest revenue and the long-term value of our franchise. The $458,000 increase in net interest revenue from a year ago was primarily due to lower deposit pricing that more than offsets the $432 million decline in average loans from a year ago.

Our average interest-bearing deposit rate was 60 basis points in the first quarter of 2012 compared to 108 basis points a year ago. On pages 23 and 24, we show our margin trends for the past 5 quarters with the impact of credit costs and excess liquidity.

For the balance of 2012, we see our net interest margin continuing in the 3.5% range. As shown on pages 27 and 28, core transaction deposits rose $151 million this quarter or 21% annualized.

Non-interest bearing demand deposits contributed over 2/3 of the first quarter growth. While we don’t believe a 21% growth rate is sustainable, we will continue to focus on core transaction deposit growth throughout 2012.

Looking at interest rate sensitivity, our one year 200 basis point ramp up in interest rates continue to show us a slightly asset-sensitive position at 1.1%.

In year 2, we moved to a slight liability sensitive position. Everything beyond that point is captured in our economic value model, or EV, which reflects several interest rate shock positions.

As a result, this is shifting us to a decreasing valuation of our equity. To offset this decline in equity and move towards a more neutral position over the longer horizon, we initiated $200 million of forward starting cash flow hedges shortly after quarter end.

Turning to fee revenue and operating expenses, as noted on page 29, core fee revenue of $13.1 million for the first quarter was up $1.6 million from last quarter and $2.7 million from a year ago. Excluded from core fee revenue for the first quarter of 2012, as shown on Page 31, was $1.1 million of interest on a 2008 federal tax refund, a $728,000 gain from the sale of low income housing tax credits, hedge ineffectiveness gains of $115,000, security gains of $557,000 which are net of $482,000 of charges for the prepayment of Federal Home Loan Bank advances.

And a $270,000 positive mark-to-market gain on our deferred compensation plan assets that is equally offset by a similar charge that is excluded from salary and benefit costs. Core fee revenue for the first and fourth quarters of 2011 excluded several items to provide consistent run rates for comparison purposes of our prior quarters.

The detail of these excluded items for both fee revenue and operating expenses is also shown on Page 31 of our investor presentation.

On Page 29, total service charge fees of $7.8 million for the first quarter were up $535,000 from last quarter and up $1.1 million year-over-year. The increase from both periods was primarily due to $700,000 of new service fees on demand deposit accounts that became effective on January 1, 2012 and higher debit card usage fees.

The new service fee and increase in debit card usage fees more than offset the lower overdraft fees, which were down $292,000 from last quarter and down $265,000 year-over-year.

Mortgage loan fees of $2.1 million were up $605,000 from a year ago and $274,000 from last quarter. Refinancing activities brought on by record low mortgage rates continued through the first quarter.

We closed $82 million in loans this quarter compared to $79 million last quarter and $74 million a year ago. Other fee revenue of $2.4 million was up $809,000 from last quarter and $935,000 from a year ago.

About $700,000 of this increase was due to timing of revenue in the first quarter and will not necessarily continue in our quarterly run rate. These items include annual credit life and lockbox fees and a positive mark on our mutual fund investments.

Looking at core operating expenses on Page 30, they totaled $42.7 million for the first quarter, down $1.2 million from last quarter and down $4 million from a year ago. The decrease from last quarter was spread among several categories.

The $773,000 decrease in staff expense from last quarter represents the largest variance and was primarily due to lower staffing levels and a decline in group medical insurance costs.

We have several companywide initiatives underway to improve operating efficiencies through retooling our workflows and automation of loan and deposit processing operations, as well as a focus on reducing other categories of operating expenses. The decrease from a year ago was caused primarily by lower FDIC insurance assessment of $2.9 million.

The lower charge related to a decrease in our assessment rate and the change from the deposit-based assessment to an asset-based assessment, which became effective April 1, 2011. The rest of the $1 million decrease from a year ago was due to expense controls and was spread across several categories.

Tier 1 Risk-Based capital was 13.7%, Total Risk-Based capital ratio was 15.4%, Leverage ratio was 8.9%, and our Tier 1 Common Risk-Based Capital ratio was 8.3%.

Also, our tangible equity-to-asset ratio was 8.1%, and tangible book value in our earnings release was $6.54, which excludes $4.75 relating to our $274 million allowance for deferred tax assets. We analyze quarterly changes that affect the realizability of our differed tax assets.

We will continue to evaluate and weigh the positive and negative evidence going forward. And if the weight of evidence shifts, such as the positive evidence outweighs the negative evidence, the valuation allowance will be adjusted or completely reversed as appropriate.

With that, I’ll turn the call back to Jimmy.

Thank you, Rex. Overall, I’m pleased with our first quarter’s results.

We’ve now completed 4 quarters since the execution of our capital transaction and problem asset disposition plan, and 3 of the 4 quarters have been profitable. Profitability, going forward, is a trend we expect to continue.

Getting to this point has not been easy and we’re still not where we need to be, but we are making progress.

Our first quarter $18 million net increase in loans represents the first positive quarter-to-quarter growth since 2008. That’s a welcome turning point.

Much of the growth was achieved by new lenders hired in the past 12 months and has been primarily in our focused areas of C&I and owner-occupied commercial real estate. We expect more growth, though we could see some volatility as we continue to work through both the weak economy and for the run-off in the construction loan portfolios.

We have achieved steady and dependable net interest margin and strong core transaction deposit growth. Core transaction deposits now represent more than 52% of total customer deposits, 5 years ago, they were 34%.

So, we’ve made tremendous strides in improving our customer deposit mix.

Credit measures are also showing improvement with the inflow of new non-performing loans declining, net charge-offs and performing classified loans decreasing, and our allowance for loan losses remained strong at 2.75% of loans. The efforts I’ve mentioned to grow C&I and owner-occupied commercial real estate loans and our efforts to reduce construction loans have fundamentally and positively changed the composition of our loan portfolio.

Five years ago, commercial and residential construction loans accounted for 43% of the portfolio compared to 15% today. We are moving in the right direction.

During our last call, I mentioned an initiative to improve our core earnings run rate, which was $26.7 million in the fourth quarter of 2011. We committed to increase that total by $2.5 million or $10 million annually by the fourth quarter of this year.

Among strategies for accomplishing this objective, our new service fees on deposit accounts that became effective January 1, renegotiated service provider contracts that are increasing our share of fees and our customers swap program that will increase fee revenue and expand our fixed rate loan product offerings. These are just 3 of several measures that will increase or that are already increasing United’s core earnings.

We have also made progress in improving operating efficiency and reducing expenses. In the second quarter, we will close 2 branches that have unfavorable long-term business outlooks.

We are evaluating all of our branches and we’ll maintain and invest in only those that have the potential to meet our performance threshold. We are leveraging technology and improving workflows to significantly improve our deposit and loan processing functions and companywide operations.

This is an ongoing project for 2012 and will result in improved efficiencies and cost savings.

While reducing staff positions by 130, 47 were eliminated in the first quarter and the balance will be completed in the second quarter. By freezing hiring for all but the most critical positions, we have been able to manage most of the reductions through normal attrition.

Staff reductions have been ongoing for several years as our business has contracted. In fact, over the past 4 years, we have eliminated nearly 400 positions.

We have done so in a discreet and thoughtful way, so as to minimize any negative impact on customer service or our employee-friendly culture. Those are few of the many efficiency initiatives that are underway or being evaluated.

Our goal throughout this process is to generate meaningful cost savings, while improving overall customer service at the same time.

I am confident that we can and will succeed. Underlying all of these revenue and expense initiatives is a vigilant focus on controlling what we can control to improve core earnings in this environment.

Our lenders are focused on making quality, profitable loans. We are earning more business from existing customers and adding new customers by growing market share.

And we are making sure that every dollar spent is an investment in shareholder value.

One last thing that I want to mention before opening the call for questions is the addition of Steven Goldstein and Tom Richlovsky to our Board of Directors, which were announced on March 21, 2012. Both of these gentlemen have extensive experience in the financial services industry, having served in executive and senior financial roles at large regional bank holding companies.

We are very pleased with Steven and Tom joining our Board.

Now Rex, David and I will be pleased to answer your questions.

I want to ask you about the -- kind of the opportunity cost of M&A and this is kind of a TARP repay questioning. On one hand, you can kind of raise now, pay off TARP, buy banks, maybe grow a little faster.

On the other hand, you put out a lot of shares over time here. You could wait, have less dilution, but it might be hard to internally generate all the capital you need by 2014 to do so.

But I’m not really – want to ask you exactly what you’re going to do, but just how you think about it.

Good morning, Jefferson, Rex. I think from the standpoint that we’ve talked about this in the last couple of calls with respect to repaying TARP, and I don’t think that position has changed at this time, I mean, we look at it in the context of dilution to our shareholders right now.

We have a significant amount of DTA built up in regulatory capital that will come back to us. We’re making money this year.

We have a dividend starting next year. And again, I think at this time, we still, without any other changes, would probably look to repay it over a period of time on an installment basis.

Technically, you can pay back as minimum as 5% right now. So, they changed that requirement to be a lesser amount.

I think in the context of weighing that currently and making that decision, Jefferson, and where we’re trading at a discount to what we call adjusted tangible book with the DTA put in it, it would make sense for our shareholders to raise equity right now in paying that back.

A couple of questions, one on the DTA. Whose ultimate decision is that, Rex, in terms of whether the allowances reverse back, whether all at once or partially?

Is that management’s decision or is it the accountant’s decision or is it a collective decision? I realized we don’t have a lot of case law on how this works.

Yes, there is very little case law. Similar to just with the other institutions also, Jeff, it’s a collaborative.

Our auditors have to be completely in sync with that decision to reverse the DTA allowance. And as we commented and I commented on the call just briefly ago in my remarks, we need to have a few more quarters of profitability and consistency in what we’re seeing.

And again, the credit metrics are moving in the right direction. And we continue to talk with our auditors each quarter on that at the same time.

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

I wouldn’t say that necessarily. It could be between those 2 points that you mentioned.

Again, I think as we continue with our profitability and continue our discussions with our auditors that will kind of frame its way out and show a clear path, I think, when we get there.

Okay. Just a few other questions, if I can keep going.

If you got it back today, the $274 million, how much, roughly in just round numbers, roughly how much of that would count as regulatory capital at the bank level?

At the bank level, it probably would be in the $25 million or so, $25 million to $30 million of that total would come back immediately for regulatory capital.

And then in the future you would pick up every quarter going forward basically, the forward 4 quarters. Going forward, you pick up another quarter as you continue.

Earnings in the quarter would offset the first quarter and the forward quarters, and you pick up the subsequent, the fourth quarter, out again.

Okay. How much cash at the parent?

Cash at the parent is $63 million. Our debt service and run rate at the parent company is roughly around $18 million a year.

So, we have probably 3 years of liquidity at the parent company. We do have one sub debt that matures in December of this year, and we’re actively pursuing that to look at financing that, refinancing that, with senior notes.

And we’ll look at doing that sometime in the third quarter, either privately or through a retail note program.

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

That’s $30.5 million.

Okay. This shouldn’t be a problem.

And then last question and I’ll stop or get back in. David, you made the comment that other real estate sales are not expected to bounce back to what you saw in the fourth quarter, if I’m looking at this right, $21 million in the fourth quarter.

What’s the -- and I know the first quarter is seasonally slow. Has something changed in the market that the pace is slower other than you’ve got less to sell than you used to have?

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

Yes. Okay.

I’m sorry. Yes, you’re right.

I spoke too quickly.

Yes, that’s really the issue. So, the market is seasonably soft, typically in the first quarter.

We will see a pickup in the next 2 quarters. But I think getting to $20 million, given our base, is going to be hard.

Has the market -- okay then forget about the amount you’re selling. Has the market fundamentally changed from a year ago?

And maybe contrast that with, so let’s say, North Georgia, how is the real estate market versus spring of 2011? And same question, as it relates to metro Atlanta or MSA Atlanta?

Yes. I don’t know that it’s changed all that much.

I think probably over past year, there had been further softening in land prices in North Georgia, more so than say Atlanta. I think Atlanta is a little bit firmer on the price point, whether it’s housing or land in Atlanta.

Although there are some out counties in Atlanta that I think are -- I don’t know if they’re deteriorating further, but they’re still very soft. But, overall, I don’t think there’s a big difference between a year ago and this year.

I think, it’s pretty similar, frankly.

[Technical Difficulty]

My questions are credit-related, so I guess, David, these would be for you. But the first one is last week we saw development with -- in the Fletcher situation, where a judge ordered liquidation in the fund now.

Does that mean anything for you all for that remaining credit piece from that relationship? I guess, it’s probably $70 million NPL at this point or does it not have any bearing, because you’ve written it down?

It’s all based on the real state. That’s #1.

And then #2, David if you could help us, how to look at the accruing TDRs, I mean on one hand, we’re seeing the continued slowing in NPL inflow, and that’s great. And we are seeing the performing classifieds come down, but the accruing TDRs, when will that growth on a linked-quarter basis start to subside or when will those peak.

Because I think a lot of us, in not knowing really exactly how to treat that, we swapped in NPAs and it ends up kind of diluting some of the progress you guys are, at least optically, that you are showing in NPAs?

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

That’s right.

Also second to that is I would tell you it is still -- even though it's on non-accrual, it is performing currently, and that’s largely due to the cash that was pledged at the inception of the loan and then we just continue to service that debt. So, it is a performing non-performer if you will.

The issue that I think has been mentioned in the paper really should not have any direct bearing at all on our loan relationship. Our loans are to, what I would call, bankruptcy-remote LLCs, standalone LLCs that sole purpose was to purchase the assets.

So, there really is no connectivity to what maybe going on at the holding company level of the company. So, I don’t think there is any direct bearing off what you’ve read about out there in the paper on Fletcher, excuse me, on our [indiscernible].

89 past due ratio on our accruing TDRs is 1.31%, which is not -- it's not as good as our overall portfolio, but it’s pretty acceptable given that these for the most part are classifieds.

The second piece of that is, as time goes on, many of these through the restructuring and many times, restructuring is as simple as cutting the rate to a borrower who is struggling from -- we put a lot of floors in our credits and so maybe they had a floor of 4%, 5% or 6% and in the process, because they are challenged and they’re having some issues, we cut the rate say to 4% or 3.5%, something like that. Well, that’s going to designate that loan as a TDR and we’re going to carry that for an extended period of time.

In fact, to pull it out of the TDR classification really would ultimately mean that the borrower has basically remediated from a risk standpoint to pass credit and we’ve been able to return that credit back to “market terms.” And so that may take some period of time.

We have seen some upgrade in our TDR portfolio. We are just beginning this on the front end of that this quarter.

Last quarter, I think we only had a couple of hundred thousand out of all of our accruing TDRs that were actually had been upgraded out of classified status. At the end of this quarter, that number was up to about $8 million, have now returned to either criticize or full pass categories.

And I believe we’ll continue to see movement in that direction going forward, because that’s what’s going on in all of our portfolio.

So, hopefully that gives you a little bit more color. And I guess the last point you asked about peaking on the TDRs.

My sense is, is that we had one larger TDR that hit us this quarter that was about $12 million of the increase and it really was a restructure that was -- it was strictly rate-driven. It was a commercial construction loan.

And after an extended dialogue, we ended up making a concession to drop the rate from, I believe, it was in the high 4s down into the 3s. And so we put that into TDR status.

When I look at other things that are out there, I think we are still going to have some inflow in the TDRs, because it’s a very good way to work with a challenged borrower and keep them going. But I don’t think we are going to see the same pace of increase.

I’m not sure. But to when we’ll finally peak, it’s hard for me to say at this point, because the ultimate resolution on these is hard to judge.

It’s hard to get them out. And the last point I guess -- I know I’m rambling a bit on this -- but the last point that I think is important is that the default rate on these TDRs is not -- while we obviously do have some defaults, they don’t default a lot.

For a company to go into TDR status with us, they have to have cash flow and for us to be able to justify doing that. And so, because they’re not defaulting the foreclosure rate or to pull down from the -- them defaulting is not all that great, so I think for the base kind of will stay at a certain level for an extended period of time.

That’s probably more than you wanted to know, but hopefully that adds a little bit of value.

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

Well, if you look at -- I don’t have exact numbers, but just for example, our total TDRs I think this quarter were right at $158 million. And of course, we had $126 million in total TDRs, yes, total accruing TDRs.

That’s not an exact thinking of default rate because obviously you have some foreclosure in there. But I think somewhere in the 15% to 20% default rate historically is probably a reasonable estimate of what the default percentage has been.

But my sense is, is that we’ll gradually start to see that decline going forward just when I look at the kinds of credits going in there.

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

Other than relating to non-recurring charges, I think we probably will see in the range of $400,000 to $500,000 possibly in the second quarter relating to severance charges with continuation, as Jimmy indicated, with the reductions that we’ve identified. That probably is the only other number we have right now as far as in the expense category of looking at it.

Obviously, we pull our foreclosure costs out of the free-tax, free-credit, but that’s not a non-recurring, so. Did that help you?

Yes, it does. David, do you think the foreclosed property costs that you had, $3.8 million or so, is that sort of a good run rate going forward?

Or do you think that’s going to be sort of lumpy from quarter-to-quarter still?

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

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

Thanks again and all have a great day.