Good morning and welcome to United Community Bank's fourth quarter conference call. Hosting the call today are President and Chief Executive Officer, Jimmy Tallent; Chief Financial Officer, Rex Schuette; and Chief Risk Officer, David Shearrow. Also participating this morning is Gary Guthrie, President of Atlanta's Residential Construction. United's presentation today includes references to operating earnings and other non-GAAP financial information. United has provided a reconciliation of these measures to GAAP in the Financial Highlights section of the news release included on its website at ucbi.com. A copy of today's earnings release was filed on Form 8-K with the SEC, and a replay of this call will be available on their Investor Relations website at www.ucbi.com. Please be aware that during this call forward-looking statements may be made about United Community Banks. Any forward-looking statement should be considered in light of risks and uncertainties described on page four 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.

Thank you for joining us, and good morning. In addition to providing a recap of the fourth quarter, our focus this morning will be on credit quality, margin, capital and core earnings, as well as guidance for 2008. On December, the 27th, we announced that during the fourth quarter, we were experiencing negative pressures on some of our key credit indicators. We also announced that we would significantly strengthen our allowance by increasing the provision for loan losses to $29.5 million, which included a special $3 million provision for Spruce Pine. As noted in the announcement, during the fourth quarter, we took $13 million of loan charge-offs and $3.8 million of write-downs and costs for OREO properties. We also charged off $18 million of lot loans for the Spruce Pine development in North Carolina. You'll recall that in the second quarter, we made a special $15 million provision for these fraud-related loans. And combined to the $3 million this quarter, we have charged off all the allocated reserve for Spruce Pine. We feel the remaining $5 million is fully collectible. David will talk about Spruce Pine later in the call. So let me sum up the actions impacting the allowance for the quarter. I will exclude Spruce Pine since we have fully charged off the allocated reserve. We increased the allowance by a $26.5 million provision. We charged-off $13 million, leaving a net increased to the allowance of $13.5 million. That increased our allowance as a percentage of loans to 1.51% at year-end, up from 1.28% last quarter. Non-performing assets declined this quarter from $63.3 million or 77 basis points at the end of the third quarter to $46.3 million or 56 basis points at year-end. The decrease from the third quarter in non-performing assets was the result of aggressively…

Thank you, Jimmy. During the fourth quarter, net operating income totaled $6 million. This is down substantially from a year ago and from the third quarter of 2007 due to the increase in the provision for loan losses and OREO expense that Jimmy mentioned a moment ago. These actions resulted in diluted operating earnings per share of $0.13 for the fourth quarter compared with $0.46 last quarter and $0.44 for the fourth quarter of 2006. For the fourth quarter, tax equivalent net interest revenue was $69.7 million, up $7.2 million or 11% from the fourth quarter of 2006. The key driver was the 19% growth in earning assets attributed primarily to two acquisitions, which were offset in part by margin compression. Net interest margin for the third quarter was 3.73% compared to 3.89% for the third quarter of 2007 and 3.99% for the fourth quarter of 2006. Contributing factors for the 16 basis point decrease this quarter were higher carrying costs of non-performing assets, CD pricing and lower core deposits. Deposit pricing over the past two quarters has been extremely challenging as large mortgage banks have aggressively competed for liquidity by offering CD rates substantially above the wholesale rates. The liquidity issue started early in the third quarter when LIBOR rates moved up, and in fact, widened further when the Fed lowered its rates by 50 basis points in September. This abnormal LIBOR spread and liquidity shortage continued through year-end and has impacted both the retail and broker CD deposit rates. Due to these pricing pressures, it did not allow us or other banks to reduce CD rates proportionally as the Fed lowered rates in the past five months. We expect continued challenges to our ability to maintain CD deposits due to the aggressive pricing by other depository institutions in…

Thank you, Rex, and good morning. I want to talk to you about the fourth quarter increase in the loan loss provision and charge-offs as well as an update on Spruce Pine. I also will give an updated perspective on how the economic environment is affecting our loan portfolio, and how we are managing through this challenging environment. And as much as possible, I want to look to forward and give our best estimate as to what the first quarter of 2008 will look like. Let me first address the fourth quarter loan loss provision. In the fourth quarter, we completed an exhaustive review of the entire residential construction portfolio with particular emphasis on the Atlanta region. As a result of this review and a continued deterioration in the housing and construction markets as well as uncertainty of where we are in the current economic cycle, we determined it was appropriate to increase the provision for loan losses and bolster our loan loss reserve. As you have heard, the fourth quarter provision for loan losses was $29.5 million, including a $3 million special fraud-related provision for the Spruce Pine development. This compared with provisions of approximately $4 million in the fourth quarter of 2006 and third quarter of 2007. During the fourth quarter, we aggressively wrote down problem loans and assets in order to move them out of the bank. By aggressively dealing with these problem assets, we believe we are now better positioned to continue to work through this difficult credit cycle during 2008. As Jimmy mentioned before, in the fourth quarter, we saw a decline in non-performing assets. As of December 31st, we had $46.3 million in non-performing assets compared with $63.3 million at September 30, 2007. Non-performers included $28.2 million in non-accrual loans, $18.1 million in OREO,…

Thanks, David. As I am sure, it is now clear to everyone that 2007 was a very difficult and disappointing year for all of us at United. We hold on our sales to warehouse standard, and 2007 did not measure up. Everyday, we make decisions that we believe to be in the bank's best interest, and we feel it deeply when our actions do not bring about positive business results. Dealing aggressively with the fraud and the loan provision was hard on the bottom line, but we are certain that we did the right thing for the bank. With the United family holding 25% of our stock, I don't say that loudly. We know very well how investors feel when the stock is down about 50%, as we are all deeply vested ourselves. We have always spoken openly with our investors in order to reassure you that we have taken important steps and will continue to take more to keep United Community Banks on the path of powerful stability and growth. To move this forward, we have robust structures and processes for the early identification and quick resolution of problem credits. Managing these, we have an exceptionally skilled and talented risk management team. Underlying all of this, we have strong reserves with an allowance for loan losses, that we feel is adequate and sound. Now, let's look to the near future. As you might imagine, it is very difficult to provide guidance for the entire year when there is so much uncertainty and volatility in both the housing market and broader economy. With this environment and our commitment to provide accurate guidance, we simply do not have a clear enough long-term view to provide meaningful guidance today beyond the first quarter. At this time, we plan to continue this short-term quarterly guidance for the remainder of 2008. Based on our assumptions about credit conditions and the overall economy, as discussed earlier, we expect core annualized loan growth to be flat for the first quarter. Also, we expect further margin compression and net charge-offs of $5 million to $7 million. As a result, we anticipate operating earnings per share of $0.34 to $0.38 for the first quarter. During times like these, we don't do knee-jerk fixes. Instead, we remember and remain focused on what got us this far, our experience and talented employees and rock solid customer relationships. All these great people are the basis of what has become our proven community banking model, one that has been successful for more than two decades. We support that model by remaining well capitalized for the very strong core earnings machine. Strategically, we are well positioned in some of the country's best markets with strong, current and projected job and demographic growth. Because of these facts and our 2000 top-notch bankers, I continue to remain extremely optimistic about United and our future. With that, I will ask the operator to open the call to your questions.

(Operator instructions) And we will take our first question from Jennifer Demba from SunTrust.

Good morning.

Hello, Jennifer.

Good morning.

How are you doing? I wanted to thank you for all the loan portfolio breakdown that you gave in this quarter's release. And looking at that, it looks like you've been able to dispose of more actual home loans, than acquisition, development or land and lot loans. I just wonder if you could give some color behind that, and what you are seeing in terms of demand for those types of credit versus the finished homes?

David, you --.

Sure. I'll take that Jennifer. Yes, you're right. We are seeing more runoff in the housing stock versus the lots, and it's really a function of what the builder community is doing. The builders have pulled back on starts. The fourth quarter annualized starts in the Greater Atlanta market were about 32,000 on a four quarter annualized basis, down from about 38,000 third quarter. And of course, starts are what drive the runoff in the lot side. So, it's really just a function of the builders continuing to reduce their inventories to a great cash to they keep themselves running.

Okay. Can you give us an idea of the type of discount you're taking to dispose of some of these credits? I am sure it varies widely, but can you give us some kind of idea, David?

Sure. Jennifer, it's a wide range. And frankly, it's driven like all real estate by location as much as anything. In the housing stock, we have not seen big discounts to date. And I think that the numbers on what's going on with average sales price in Atlanta, pretty much would support that based on recent statistics down there, which show prices have held in pretty well. On the development side, it is where we've had more charges and it's a pretty wide range, again, depending on where we are. It could be from no loss, up to a project that maybe has a lot of work yet to be completed and it's far out. And you could see a 40% or even a 50% loss. But Gary might want to just follow on to that and just give his view as well.

Well, David, I think you covered it pretty well. We have certainly had better success selling housing, and lots are a little more difficult proposition and certainly no two projects are the same, location or quality. But it would be hard to generalize a particular loss percentage, and it really has been all over the board.

One more question. Of the $864 million in res construction of Atlanta, is most of that, I am assuming -- and can we give any generalities in terms of where it is, how far out it is?

Yes, we can. If you look at our Atlanta portfolio, roughly 70% of our portfolio is going to be on the north side of the city, 30%-35% on the south side and which is good. I mean while the whole market is soft, there is more softness on the south side than the north. So it would be unfortunate than that. We're also more concentrated in the closer-in counties. We have more exposure in Gwinnett and DeKalb county, less in the farther out counties. So we think while we're experiencing slowness, we think our portfolio concentrations are in the better counties and in the better side of Atlanta as well.

And do you have approximation of how much is the closer-in counties versus the outer counties or guesstimate?

I was just kind of eyeballing or granular detail here. I would say just eyeballing, probably better than 70% are in pretty close counties, with 30% in farther out counties.

Thanks a lot.

We'll move to next Kevin Fitzsimmons with Sandler O'Neill.

Good morning, everyone.

Hello, Kevin.

Good morning, Kevin.

Can you give us a sense, I think you mentioned earlier that with closings exceeding starts that, I guess that's what you need to kind of whittle down that inventory in Atlanta. And I am sure there is some that you're watching closely all the time. But, based on the pace that you've seen that happen, or you're kind a projecting outwards or based on what you are seeing now, how long would it take to whittle down that inventory to a level that's more normal? Are we talking years at this point, and is that something that's just too difficult to do?

No. We have some pretty good statistics, Kevin, on what's going on in the market down there. The housing inventory was up in the fourth quarter, but not a lot. We went from 10.3 months, and finished houses up to 10.7 in the fourth quarter. So a slight increase there. That's about two months longer than where you would normally see a stabilized market on the finished housing. The problem that we have been talking about, the real problem in Atlanta is the number of lots on the ground. And right now, there is about a 146,000 lots on the ground in Atlanta. That's up from a 140 last quarter. If you look at that relative to absorption, you have to keep in mind that, and I'll tell you that vacant lot inventories are about 56 months at the end of the fourth quarter, up from 45 months into the third quarter. Well, the big driver there, you only have 6,000 increase in lots, but the big driver was starts fell off substantially in the fourth quarter down to 132,000. So, you have two factors that affect that month supply. What I would walk away with is there is still a lots problem down in Atlanta. At some point in time, the overall starts will start to pick up, because as you correctly pointed out, closings have exceeded starts really for a year consistently. So, at some point, we're going to see builders start to increase their takedown on lots and we'll see those numbers get better, but we're still in a pretty tough time right now.

But just based on what you're trying to model going forward, do you have any estimates based on the pace that at this number of months out, or this number of years out, builders will be kind of reaching the point where they will have to pick up, start increasing starts again? And I know there are a number of assumptions that go into that, but is there any kind of analysis like that is being done?

We have not been able to come up with anything really scientific on that, Kevin, and maybe because this has really been a very unusual market that's month-to-month. Gary, you might want to get some play from your builder clients about what you are hearing

Well, I thought if you're talking about the lot inventory, if you look at the fourth quarter of '06, it was roughly 26-month supply of lots. In a year's time, we went to 55 months, and 26 months was considered a relatively healthy supply. So, it took about a year to get where we are. And really those numbers are only affected by start rates and it's really, virtually impossible to predict start rates from the builders in the market. And Kevin, the only conclusion you may draw is it took about a year to get out of the [whack] to the extent that it is now. So, you'd hope if you get back to our normal start rate, you'd begin to get back in equilibrium maybe in a year to 14 months.

This is Jimmy, Kevin. One of the other components that will drive that, and we still feel very fortunate job growth in the metro Atlanta is still very strong, projected 53,000 year-over-year and increasing, as well as population growth. And certainly, that's what will be the major driver in absorbing some of the oversupply.

Can you also comment on just the issue of interest reserves, and what you're observing on that in terms of being any kind of leading indicator on borrowers or developers that might be tomorrow's problems?

Well, Kevin, when we go into a development loan, of course, there we have a full budget that has hard and soft costs. And part of that soft cost budget is interest carry to completion of the project. We've got roughly 20% of our development loans that still have some degree of interest reserve in them, which is to say 80% are paying current either on the sale of lots of those developments and/or other resources as well. So, that's kind of where we are at right now. That's the normal cycle on the development cycle project that you would go through, and half carry until you complete the project, and then cash flow does get generated as those lots are delivered to the builder.

Okay, great. And lastly, Jimmy, can you just comment on, and I apologize if you've already spoken on this, de novo plans, and maybe what you were anticipating before, and maybe how it's changed now with the environment?

Well, Kevin, we've always said that we would certainly want to expand as we find the right people with the right opportunities as long as feel we can afford it. We have a strong obligation to our shareholders relative to earnings per share, which we have stated for years. That hasn't changed. I will not say we won't expand, but it would have to be something very profound that would entice us to take own additional investments. So, I don't think 2008 will have a very limited, if any, de novo expansion. What you will see in '08, is some of our temporary locations that we started a year or 18 months ago, and we have three or four those that have been extremely successful. Probably about mid-year, we will start building during the brick and mortar, where we can move them out of the temporary location into the permanent. It won't have as large of a financial impact, but in order to continue to have these de novos to be successful, you've got to show and make that commitment of putting true brick and mortars. So de novo expansion in '08, we will build out some of our temporaries.

Okay, all right. Great. Thanks, guys.

And we'll go next to Christopher Marinac with FIG Partners.

Thanks. Jimmy and David and Rex, I want to ask about your outlook from the reserve perspective. Have we seen the reserve building that you want or can we anticipate perhaps some slight building charge-offs from Spruce Pine?

I'll take that. David, you can certainly add on. We feel very comfortable, Chris, with our reserve at above 1.5%. Quite honestly, that is the strongest that it has been in 10 years. Certainly, this is a fluid, and we are watching it very closely. And, as we have purposely made that decision in the fourth quarter to be aggressive in write-downs, be aggressive in going ahead and taking discounts on OREO to move it out, as well as bolster the reserve, we feel pretty confident about where we are at this point.

I would just add to that. If you look our reserve relative to our non-performers, 320%, which we feel is a very strong place in setting our yearend reserve. We've gone to extensively look at our portfolio to make sure we've got portfolio risk rated correctly. And, so we feel pretty comfortable where we're at right now.

Good. And I guess a follow-up just to get some more color, if you will, on sort of South Atlanta versus North Atlanta, as well as North Georgia, from the construction perspective.

I am not sure I know exactly what you would like comment on. Could you --?

Well, from the residential portfolio, how much softer can South Atlanta get relative to your exposure there compared to any potential issues that are still lurking in North Atlanta versus North Georgia?

Yes. Well what I would tell you is, first of all, let me address, and I think it's important we spend so much time talking about Atlanta, which is roughly 40% of our loan growth, but 60% is not in Atlanta. And frankly, our portfolio outside of Atlanta has held up very well. There is slowness occurring in North Georgia, but it has not impacted our clients in the same fashion as Atlanta. And part of that is that the nature of our clients outside the North Georgia area tends to be smaller. A lot of single construction loans to a single borrower and that type of things. So, it's a different type of client that's held up very well. In terms of South Atlanta versus North, there is some difference there and certainly the lot inventory is longer in the South side. I think the South side lot supplies is north of 60 months, whereas it's in 53-54 months on the north side to give you perspective. So, it will be more challenged on the South side. On the other hand, Henry County, for example, is one of the fastest growing counties in the country, which is on the South side of town. So, I think, again, we have more of a supply issue than a demand issue, although demand is softer. But I think longer term, I think we will see a turnaround down there on the South side come and hopefully in the not too distant future.

Great. That's all. Thanks very much.

(Operator Instructions) And we will go to Matt Olney with Stephens Incorporated

Yes, good Morning, guys. Thanks for all the details you have given us on the construction news in Atlanta. But I want to kind of look beyond that, and get your take on if there are anymore worrisome credit trends that you guys see developing recently excluding construction in Atlanta.

You are talking about within our portfolio, Matt?

That's correct.

David?

Yes. I'm going to address that, Matt. Again the challenges have been residential construction in Atlanta, if you look at commercial at this point in time, we have not seen any challenge there. Having said that, we're concerned about what's going on in the market and the economy, and we're watching it closely. But if you were to dissect our past dues, for example, and we gave you some of that in our opening comments, our past dues were up, but 55% of our overall past due dollars over 30 days were in residential construction predominantly in the Atlanta area. And in fact, commercial past dues in the fourth quarter were down from the third quarter. So, that's holding up well. The core residential portfolio, which is about 25% of our book, continues to hold up very well our losses are nominal. Past dues are up slightly in the fourth quarter. And I think that's probably a function of what's going on in the economy and gas prices, et cetera. But nevertheless, today, it's holding up very well. Having said all that, we are keeping a close eye on it. We are concerned about what's going on the greater economy as a whole.

Okay. That's helpful. And would you say that you've timed your underwriting standards for non-construction credits, therefore move your traditional C&I credits that you are seeing? Have you tightened those up at all given that the possibility of credit concerns in that side of the portfolio?

I mean I think we have maintained a conservative underwriting posture on a consistent basis, but when we are underwriting in the current times on the commercial side, for example, say, we are talking about commercial retail center, we would probably be more careful about in extending that kind of credit right now, knowing that there's some slowdown going on in the economy. So, I guess the answer is yes. Yes, I think we maintain a fairly conservative posture all of the times. I don't know that it's significantly tightened.

Okay. Thanks, guys.

And we'll go next to Adam Barkstrom with Stern Agee.

Hi, guys, good afternoon.

Hello, Adam.

Hello, Adam.

I was curious, you guys gave a lot of loan detail. It was certainly helpful. But are you looking at the net new MTA flow for the quarter? It was looking like that $14 million of new loans flowed into the non-performers. I was just wondering given all the colors you've given, if you could talk about that a little bit as to what slowed it down obviously?

Again, it would be predominantly residential construction in Atlanta. I believe if you looked at our NPA, total NPAs on the books at the end of the year, I thinks 56% was concentrated in the Atlanta region. And so, if you think in terms of what came on, that's where most of it was, and that's where most of it's tied as far as the category and the location.

Okay. And then just curious with the recent rate cuts there in your press release and in your comments that we're going to see some continued margin pressure here, just wondered if we could tighten that up a little a bit, and what in particular you're looking for? It was in a range in 1Q as far as margins go.

Yes, Adam, this is Rex. I think when we look at the margin and most banks probably were somewhat surprised a little bit in the fourth quarter with liquidity pressures in particular. And again, that's driven by some of the large banks pushing up CD pricing, and that's how, I guess, all banks fairly consistently in the fourth quarter. So, that was a big part of where you saw a 16 basis point compression in the fourth quarter. About half of that was related primarily to additional funding cost, driven primarily again with respect to CD pricing. We did have a small impact of higher level of NPAs, as I mentioned. That was about three basis points in our mix in lower DDA. Our balances have another five basis point impact. So that in perspective looking at the first quarter, I think we are seeing, as I mentioned in the call earlier here that we're seeing some improvement in the market with respect to LIBOR pricing. And that has come down much closer to the longer-term rates that we see out there in the wholesale market. That eventually I think will help with respect to CD pricing. However, the broker deposit pricing even as of this morning is still probably 80-90 basis points higher than the 12-month curve out there. But I still think again there is some opportunity to see that loosening up a little bit into the first quarter. The other key driver with it though, underneath it is, on Monday, in our Atlanta paper, we have a full page color out by WaMu having one-year CD out there at 6.50. So that's the problem. We continue to see that the pressures from the large banks have not to come down yet. It'd probably come down with the 75 as of yesterday. And also community banks that we still see in the market are over 5%. So, that is the real driver underneath. Sort of looking at expectations for the first quarter, it won't be 16 basis point. We don't expect to have. We do see some improvement. Could it be half of that from compression? It probably could be. But, again, if we see improvement earlier even at the 75 basis points and we're able to pull down CD pricing, which we are doing, it might level that off a little bit too.

Okay, great. Thank you.

And there are no further questions at this time. I would like to turn the conference back over to Mr. Tallent for any closing remarks.

Well, let me just say thank you for being with us this morning. Thank you for your interest in United Community Banks. We look forward to speaking with you in April and hope all of you have a great day. Thank you.