Good morning, and welcome to the SCBT financial event. This event is being recorded. I would now like to turn the conference over to Donna Pullen, SCBT Director of Public Relations and Special Projects.

Thank you for calling in today to the SCBT Financial Corporation Earnings Conference Call. [Operator Instructions] Now we'll turn the call over to John Pollok, Chief Operating Officer and Chief Financial Officer of SCBT Financial Corporation.

Good morning, and welcome to SCBT Financial Corporation's First Quarter Earnings Conference Call. With me today are Robert Hill, President and CEO; John Windley, Chief Banking Officer; and Joe Burns, Chief Risk Officer. Our format today will be that Robert Hill will provide some opening remarks, John Windley will provide an overview of the bank and then I will provide additional detail on our financial performance. We will conclude the call with a Q&A session with the research analyst community. Before we will begin, I want to remind our listeners that our discussion contains some forward-looking statements regarding both our financial condition and our financial results. We have included some slides for this call, and I would first refer you to Slide #2 for our cautions regarding forward-looking statements. I will now turn the call over to our President and CEO, Robert Hill.

Thank you, John, and I appreciate everybody being here this morning. We're pleased to share with you our first quarter earnings results. We showed continued progress on many fronts. I refer you to start off on Slide 3 and just -- I'll cover some of the highlights for the -- for what was really a busy first quarter for us. On February 13, we implemented the Savannah Bank system conversion, so obviously a major focus for the quarter. We also announced in the first quarter the First Financial Holdings merger, which we continue to feel very, very good about. And earnings for the quarter, we had $0.63 a share in earnings per diluted share and $10.6 million in total net income, which was reduced by $0.08 for merger-related costs, and that compares to $5.9 million or $0.38 per share on a linked-quarter basis. And for operating earnings, we were at $12 million or $0.71 per share, and that represents on ROA of 95 basis points and an ROE of 9.49%. Very pleased with the continued strong and stable margin that we have, which actually had some slight increase for the quarter at 4.94% and steady progress on asset quality improvement. Our non-performing asset quality ratios improved nicely, and the total amount of dollar drop year-over-year in NPAs is 16%. The classified assets also had a nice drop. And year-over-year, 21% drop on classified asset levels. And charge-offs were the result -- lower as a result of the improved asset quality and dropped to 56 basis points for the quarter. We're also approaching our 1-year anniversary on our Peoples acquisition, and we're very pleased with the improved -- the progress there and performance so far. We also have -- continue to have a solid pipeline and good opportunities for new business and had non-acquired loan growth for the quarter of 5.2% annualized. I'll now turn the call over to John Windley for some detail on loan and deposit growth. And then, John Pollok will cover our first quarter performance and also discuss the recent focus on FDIC indemnification asset and related accounting issues.

Thank you, Robert. If I could to please get you to turn Slide 4 to give you some additional highlights of our first quarter performance. First, let me give you a little detail about the $33 million in legacy loan growth that we experienced. This growth primarily occurred along the Interstate I-85 corridor from Charlotte to Northeast Georgia and also within our Savannah Bank franchise. We've also seen an acceleration of activity in our Charleston market, which adds to our excitement of the pending First Federal merger there. If you look at the industries where we've experienced this growth, they primarily come in the commercial real estate and C&I loans. And the industries associated with this growth, we've seen some industrial expansion within the franchise. We've also seen opportunities in the medical field, as well as higher education and nonprofits. Drilling into the first quarter results, the 3 specific loan categories where we have experienced growth are: owner-occupied commercial real estate is up $12 million; nonowner-occupied commercial real estate is up $9 million; and our C&I portfolio is up $11.5 million. As you know, we've had a focus on trying to grow our C&I portfolio and have experienced a year-over-year increase of over 35% in that loan category, but still have significant opportunities for us to continue to grow that across the franchise. We did experience new loan growth in our Savannah market since the closing of the acquisition in December. Savannah is often referred to -- their MSA is often referred to as the coastal empire. And if you look at the economics within the coastal empire, they've experienced 4 consecutive quarters of solid gains in leading economic indicators. We have a high-quality team of experienced bankers in this dynamic market, and we believe this will lead to continued…

Thank you, John. With a lot of recent discussion surrounding the FDIC indemnification assets, we show you, on Slide #5, a breakdown of our current portfolio mix. The FDIC-assisted loan portfolio and the related loan indemnification asset now represent only 9% of our total portfolio. Our practice since our first FDIC acquisition is, as future losses decrease, the expected reimbursement from the FDIC is expensed over the lesser of the remaining life of the related loan pool or the remaining term of the loss-share agreement. This practice is consistent with the latest accounting guidance. We have no issues with the extended foreclosure time. The foreclosure period in Georgia is generally less than 60 days. We reappraised most of our troubled assets every 6 months. We are current with our claims with the FDIC. And in the fourth quarter of 2012, we executed an auction of 167 properties with a net book balance of $8.4 million in Northeast Georgia and plan to continue this process. The blended yield of our FDIC-assisted portfolio adjusted for negative accretion of the indemnification asset now stands at 5.4%. Now turning to the margin. Our margin continues to be very strong. You can see our margin, from a linked-quarter basis, improved from 4.88% to 4.94%. Yields on our earning assets increased, linked quarter, from 5.03% to 5.07%. The acquired loan yield of 9.51% is down from 11.37%, linked quarter, due to the full impact of the lower-yielding Savannah portfolio. Non-acquired loan yields now stand at 4.51%, down from 4.66%, linked quarter. And our new production rates are coming on in the low 4% range. We had net releases during the quarter of $14.7 million with the majority of that centered around our FDIC-acquired assets. Our 1-year anniversary for the Peoples portfolio, as Robert mentioned earlier, is…

Thank you, John. If you look at Slide #9 with me for just a minute, I just want to talk about the economic trends that we're seeing in our markets. And I'd say, overall, really probably for the first time, we're seeing steady improvement on the residential side, but also business expansion, which has been a little further slower to come. But unemployment rates in most of our markets continue to improve nicely. Personal income growth in places like Charlotte are continuing to see nice pickups. But most importantly, the population growth in our market's significantly outpacing the country as a whole, and places like Charleston and Charlotte and Savannah are having significant pickups in migration again for the first time in a while. That is having an impact on building permits. You see, in Charleston, up 67% year-over-year; Savannah, 82%; and in Gainesville, Georgia, 108%. And as John Windley mentioned a minute ago, we're seeing that in most of our markets. That's having an impact on housing prices. In the Charleston area, home prices are up 4% year-over-year; and in Greenville, they're up 7% year-over-year. And we're also seeing some fairly significant business investment. Boeing, in the first quarter -- excuse me, actually, on April 9, announced a $1 billion expansion in Charleston, creating about 2,000 jobs. In Charlotte, MetLife just announced a $125 million expansion and 2,500 jobs. And in Athens, they've been in the process of building an 850,000 square foot Caterpillar plant that just opened in March, will add 300 jobs by year end and 1,400 jobs by 2018. So we're starting to see some real economic gains, and that's having a positive impact both on our credit quality and on our overall growth. It's a pretty exciting time in our company. We feel like we are continuing to produce steady consistent improvement. With our shift and now having the integration of Savannah behind us, we can move to really focus on growth and building more share in that market and further development of our integration plan for the First Federal merger. We filed our S-4 proxy. It was filed on April 23. We plan to file the regulatory applications in May and are still shooting for a mid-third quarter close. So as the -- as we move further into the year, we will continue to focus on reducing our problem assets and the expenses associated with these, continuing to attract the quality customers and bankers that are really driving our performance. That concludes our prepared remarks. So I'll ask the operator to open up the line for any questions you may have.

[Operator Instructions] Our first question comes from Jefferson Harralson at KBW.

I want to ask you a question. You mentioned the loan growth and what's going on in the markets. Can you talk about how it went during the quarter and what you're seeing maybe in -- so far into this quarter? Is it -- across the board, we have seen disappointing loan growth from the small banks in general, but it does seem like it's picking up towards the end of the quarter. Can you just talk about what -- how things may have progressed in the quarter into the April?

Jefferson, this is John Windley. If you look at the first quarter, candidly, the first part of the quarter, January, February, we're a little bit light. We saw a very robust March, which allowed us to produce the growth that you -- that we've already talked about. And I would say, right now, we continue to see growth in the same markets that I mentioned, primarily along the I-85 corridor in Charleston and Savannah, a little bit of uptick here in the Midlands. But I'd say, overall, we still see some opportunities that are out there. I would say it's not robust opportunities, but I think we can continue to grow at a good steady pace and, hopefully, achieve our goal of growing roughly 6% this year in loans.

Jefferson, this is Robert. Just to compare, last year, first quarter was really our only quarter in a while where we've had loan contraction. And so, we just came out of the year a little slower on the loan grown front, and we started that way the early part of the year. But I'd say, as the quarter went on, we began to see the pipeline fill up pretty nicely.

Okay. My follow-up will be on the timing of Savannah Bank cost savings with the conversion happening in 2Q. Would you expect maybe half of those in by the next couple of quarters or 100% in by year end? Or, I guess, what you -- what can you tell us on -- what do you think about the timing of the Savannah Bank cost savings?

Jefferson, this is John. We feel like we've probably got another $500,000 or so to go in terms of true cost saves. Obviously, when you convert mid-quarter and you're going from one system to another system, we feel like, next quarter, we'll bring out -- be able to bring a lot more clarity around Savannah. We're extremely confident it's still double-digit accretive. But obviously, when you kind of do it in the middle of the quarter, it's a little messy.

Our next question comes from Christopher -- no, I'm sorry, from Mac Hodgson at SunTrust Robinson Humphrey.

Just a couple of quick questions. I thought it was a pretty straightforward quarter. On the -- John, if you could speak to the margin outlook. I know margin obviously was up a little bit this quarter. How do you -- how would you expect it to trend? I know it could be difficult to predict given the re-estimation of the cash flows from the deals, but help us out a little bit with the margin there.

Well, I think, as we said last quarter, we felt good that the first part of the year would be very stable. I think, next quarter, obviously, assuming things continue like they are, we'll have our first major release on the Peoples portfolio. That's continued to do very well. So we feel like from a margin standpoint that overall we're at least stable right now.

And potential upside if the Peoples comes back really well? Or that's kind of baked into that guidance?

Well, I think if it comes back really well, as we get into the quarter to do our re-cash, it could potentially take the margin up some.

And just remind me of the expected closing of the FFCH.

Well, this is John again. We filed our S-4 this week. I think, as we've mentioned, when we announced the merger, we would hope that it's going to happen in the third quarter. So I would say, right now, probably mid-third quarter, assuming everything from a regulatory standpoint in our applications progress through time.

The next question comes from Christopher Marinac, FIG Partners.

John, just on the leveraged offer of the closing of First Fed, will the integration -- or, I'm sorry, the systems conversion happen this fall? Or what was the schedule for that one?

Chris, this is Robert. That will be a '14 conversion, probably somewhere in the -- maybe the second quarter of '14. I think the thing on this conversion is -- it's important to remember 2 things. First is, obviously, it's a large integration. We want to make sure that we execute it very crisply, very important to us. The second is we're not just using this as an opportunity to integrate the 2 banks. We're really using it as an opportunity to make sure we've got a platform that can take us to $20 billion, $25 billion. So we're kind of using that time for not only just kind of a normal merger integration, but also make sure we've got a strong platform for the future.

Great. And I guess, just one other sort of, I guess, more -- a new detail. This has to do with sort of incremental loan yields that you're doing on the commercial portfolio and whether you're thinking of the C&I loan or a CRE loan. Just maybe if you could give us some color on sort of what's the new loan production kind of being priced at and sort of what are you accepting versus rejecting out there?

Chris, this is John. It's really kind of all over the board a little bit. The very solid higher-end C&I opportunities, I would say, in the LIBOR plus 200 to 250 range is what you would be seeing. From a fixed-rate standpoint, I think, you go back to what John said, our overall yield, I think, is around 4% or a little north of 4%. It really depends on the quality and the competition when you're looking at opportunities. We have priced some in the higher 3s. But I would say, on the average, we're around the 4% mark. And in some cases, we've been able to also continue to get floors on our floating-rate transactions.

Chris, this is Robert. The thing I would add on there is just I think where we have drawn the line is these real low, long-term, 15-, 20-year or even 10-plus-year fixed rates. We've done very little of that, and we're seeing some in the marketplace do an awful lot of that. So that's been -- where we've drawn the line has really been on these long-term fixed rates.

Understand. Great. And just a quick one on Charlotte. Can you remind us, sort of, your penetration of the market there and sort of, I guess, overall big picture of the opportunities to continue to do more organic business there?

Chris, as you know, we've only got 3 locations. They're primarily in South Charlotte, which is a high-growth area of Charlotte. We have an experienced team of bankers up there, and they've really created some additional momentum. So we think the upside is pretty large in the Charlotte market with the quality of the team that we have there and what's happening economically in Charlotte.

Chris, this is John Pollok. In Charlotte, we are -- if you look at deposit market share in Charlotte, we're #8.

Our next question comes from William Wallace at Raymond James.

I have a couple of questions on the mortgage business. First question is, as it relates to Savannah's business, have you guys fully rolled that into your bank, your mortgage bank?

Wally [ph], this is John Pollok. We're just beginning down there. Obviously, there, I think, as we've mentioned before, they were on our brokerage systems. So we've completed the training down there. We're looking to hire new originators in that market. And so, I would say we're in the beginning stages of getting that model implemented in Savannah.

Okay. And so what's the timing of when you would expect to have them operating under the same method that you do, in other words, methods of delivery where you can collect the full gain on similars [ph]?

The training is complete. And I feel like, this quarter, we'll really begin to make a lot of progress down there. So I would say, from the training side, we've finished that.

And then, on the slide, you mentioned the current pipeline of $210 million. How does that compare to, say, the beginning of the first quarter?

It's actually up some. This is John again. It's actually up some. As John Windley mentioned earlier, we're starting to see an increase in purchase business. The other thing that we're seeing on the mortgage side, and we've seen this in the past, is we are seeing some shift to on-balance sheet financing. We're seeing more construction lending. We're seeing folks begin to buy lots again. And so, we have a really nice pipeline of what I would call construction loans coming through for folks building their permanent and secondary residence.

Okay. Good. And then, the last question, on the -- on that business is, the way you report the revenue line item, is that reported net of the variable compensation expense?

That is correct.

At this time, there are no further questions. And I would like to turn the conference back over to John Pollok for any closing remarks.

Thanks to everyone for participating today and for your interest in SCBT. We will be attending the Gulf South Bank Conference beginning on May 13, and we look forward to talking with you there or at our next quarterly call. Thanks again.

The conference has now concluded. Thank you for attending. You may now disconnect.