United Community Banks Inc (UCBIO) 2016 Q2 法說會逐字稿

Welcome to United Community Banks second-quarter earnings call. Hosting the call today are Chairman and Chief Executive Officer Jimmy Tallent, President and Chief Operating Officer Lynn Harton, Chief Financial Officer Rex Schuette, and Chief Credit Officer Rob Edwards.

United's presentation today includes references to operating earnings, pretax, free credit earnings and other non-GAAP financial information. For these non-GAAP financial measures, United has provided a reconciliation to the corresponding GAAP financial measure in the financial highlights section of the earnings release, as well as at the end of the investor presentation. Both are included on the website at ucbi.com. Copies of the second quarter's earnings release and investor presentation were filed this morning on Form 8-K with the SEC and a replay of this call will be available in the Investor Relations section of the Company's website at ucbi.com.

Please be aware that, during this call, forward-looking statements may be made by representatives of United. Any forward-looking statement should be considered in light of the risks and uncertainties described on page 4 of the Company's 2015 Form 10-K as well as other information provided by the Company in its filings with the SEC and including on its website.

At this time, I will turn the call over to Jimmy Tallent.

Good morning, everyone, and thank you for joining us for our second-quarter earnings call. We had a very strong second quarter with outstanding results across our Company. This performance is perhaps the best demonstration to date of the success of our investments in new businesses and markets, as well as the success of our acquisition strategy.

Our bankers excel by every measure. Their major achievements included our highest linked quarter fee revenue growth, strong loan growth and, excluding merger-related charges, a 1.07% operating return on assets and operating net earnings per share of $0.36. Our SBA and mortgage lending businesses performed exceptionally well due to the close working relationship with our community banks.

This is proven to be a winning combination for meeting the borrowing needs of our customers, and providing a strong and sustainable fee revenue stream.

We were able to achieve expected cost savings in full from the Palmetto acquisition. This success allowed us to invest in additional lenders and markets, while still improving our operating efficiency ratio to 57.8%. I described those investments in adding 20 revenue producers during our first-quarter call.

In the second quarter, as I will describe in today's call, we began to see the results. Earlier this month, we completed our acquisition of Tidelands Bank on the South Carolina coast. Since this occurred in the third quarter, the Tidelands balance's end results are not included in our second-quarter results. I will talk more in a moment about the Tidelands transaction and our second quarter, but first let me mention some additional highlights from the quarter.

Net income was $25.3 million or $0.35 per diluted share. Included in those results were pretax merchant-related charges of $1,180,000 or $0.01 per share. Excluding merger-related charges, net operating income was $26 million or $0.36 per diluted share for the quarter. This is up 13% versus a year ago on a per share basis.

Our GAAP return on assets was 1.04%. It was 1.07% excluding merger-related charges. This is up from 100 basis points both last quarter and a year ago, and is approaching our [1.10%] percent goal by the end of the year. Excluding merger-related charges our operating return on tangible common equity was 11.6%, up 65 basis points from the first quarter and up 136 basis points from a year ago. Our margin was 3.35%, down 6 basis points from the first quarter, but up 5 basis points from the second quarter of 2015.

Net loan growth was $181 million from the first quarter, which is 12% annualized. Second-quarter loan production was $662 million.

Our provision for credit losses with a negative $300,000, down from a negative $200,000 in the first quarter and a $900,000 charge a year ago. Net loan charge-offs for the quarter were $1.7 million. That compares to $2.1 million for the first quarter and $1 million for the second quarter of 2015.

Our allowance to loans ratio was 1.02% compared with 1.09% at the end of the first quarter. Our nonperforming assets to total assets ratio held steady at 28 basis points.

Fee revenue was up $4.9 million in the first quarter, with significant increases in mortgage fees and gains from sales of SBA loans, and customer derivatives. And, all of our capital ratios remain very strong.

Now I will share some details from the quarter. As you can see on page 12 of the investor presentation, pretax, pre-credit earnings were $41.5 million, up $3.2 million from the first quarter and up $8.5 million from a year ago. Our net interest margin was down 6 basis points from the first quarter, and up 5 basis points from a year ago. The 6 basis points decrease was mostly due to the lower yield on the loan portfolio.

Last quarter, I mentioned that our margin was up in the fourth quarter due to the impact of the fourth quarter rate increase and accelerated discount accretion on purchase loans. The decline in purchase loan discount accretion this quarter accounted for approximately half of the 6 basis points decrease in our margin from last quarter, leaving the true linked quarter margin compression at 3 basis points.

The 3 basis points decrease was due to competitive pressure on loan prices. For the second quarter, purchased loan accretion was about $500,000 compared with $1.2 million in the first quarter.

Turning to loan growth and production, we grew loans by $181 million during the second quarter, representing an annualized growth rate of 12%. As shown on page 15 of the investor presentation, loan production remained strong at $662 million.

Approximately $433 million was produced by our community banks, and $188 million was from our specialized lending areas.

Looking at first-quarter loan production by categories, 58% was in our C&I and CRE portfolios. Commercial loans accounted for $393 million of total production, and increased outstanding loan balances by approximately $155 million. In our first quarter call I described investments in new lenders in our specialized amending areas, and throughout the Bank. We continue to add lenders through the second quarter.

Additionally, in early July, we added a new group of seasoned lenders who specialize in senior living that have been integrated into our specialized lending group and primarily cover the Southeast markets.

Our footprint includes some of the most desirable retirement areas in the country, so this expertise is a valuable resource to our Community Banks. I am excited about this team, and I am thrilled they chose to join United. For the $300,000 recovery, our provision for credit losses remains low by historical standards, and reflects the very favorable credit trends that we expect to continue through the remainder of 2016.

Our allowance for loan losses was 1.02% at quarter end, down slightly from the last quarter, but still considerably above our peer banks median of 81 basis points last quarter.

You will find the trends in fee revenue on page 12 of the presentation. Our fee revenue-generating businesses performed very well in the second quarter, including record performance for mortgage and SBA. Second-quarter fee revenue was $23.5 million, up $4.9 million from the first quarter following some seasonal decline in the number of categories.

Total service charges and fees on deposit accounts were up $389,000 from the first quarter, with increases in both interchange fees and other service charges and fees. Mortgage fees were up $1.2 million from the first quarter. We closed $182 million of mortgage loans in the second quarter, up from $146 million in the first quarter.

Turning to our SBA business, gains from sales of SBA loans totaled $2.8 million in the second quarter, compared with $1.2 million in the first quarter and $1.5 million a year ago. We closed $41 million in SBA loan commitments in the second quarter, funded $34 million in loan balances, and sold $33 million in guaranteed loans.

Perhaps most notable is that $17 million or half of the production came from our Community Banks. This is a testament to the synergistic relationship between our Community Bank and our specialized lending teams.

By comparison, in the first quarter, we closed $36 million of loan commitments, funded $22 million in balances, and sold $13 million of the guaranteed portion.

Improvement in our customer derivative business provided $1.1 million in fee revenue in the second quarter. This was up $327,000 from the first quarter, and up $549,000 from a year ago. All in and across all of our products, we had a strong quarter from a fee revenue growth perspective.

Expenses are on page 12 of the investor presentation. They include merger-related charges of $1.2 million in the second quarter, $2.7 million in the first quarter, and $3.2 million a year ago.

Excluding merger-related charges, operating expenses were $56.9 million in the second quarter, $55.2 million in the first quarter, and $45.2 million a year ago. The acquisitions of First National Bank and Palmetto accounted for a significant portion of the $11.7 million increase in operating expenses from a year ago.

On page 39 of the investor presentation, we have included a reconciliation of operating expenses to GAAP expenses. The linked quarter increase of $1.65 million in operating expenses excluding merger-related charges was mostly in salaries and employee benefits, advertising and public relations, and professional fees.

Salaries and employee benefits were up $510,000 from the first quarter. This increase was mostly due to higher commissions and incentives related to strong loan production, growth in fee revenue, and overall earnings performance.

In addition, on April 1, our annual merit increases were effective and we increased our 401(k) matching contribution. Combined, these added approximately $900,000 to second-quarter salary and benefit expense.

We also saw the full-quarter impact of the additional 26 lenders mostly in our mortgage and specialized amending areas that I mentioned in our first-quarter call. In the second quarter, we added another nine revenue producers, most of them again in the mortgage and specialized lending areas.

The increase in costs for the [myriad] 401(k) in additional revenue producers offset the impact of the cost savings from the elimination of staff positions late in the first quarter, following the Palmetto systems conversion.

Professional fees are up $489,000 from the first quarter, due to ongoing projects for processing compliance improvements, and increased scalability as we continue to grow both organically and through acquisitions. Overall, we were able to grow revenue which outpaced expenses to provide for solid performance toward our fourth-quarter goal of a 1.10% return on assets. This resulted in a positive operating leverage of 2.3% in the second quarter. And our operating efficiency ratio improved to 57.8% in the second quarter, down 130 basis points from the first quarter.

Before I conclude my prepared remarks and open the call to questions, I want to mention a few things that are very important.

Certainly, the second-quarter results shows that investments in organic growth are achieving solid results. They almost always do, and that is why they continue to be our primary focus. At the same time, acquisitions have been and will be an important part of our growth strategy.

To appeal to us, an acquisition opportunity must meet four criteria. It must be accretive to earnings per share. It must have a reasonable earn back of tangible book value dilution. It must be strategically compelling, and it must have though execution risk.

To meet our financial objectives from each acquisition, we must also achieve the expected cost savings, and I am pleased to report that we did just that with both First National Bank and Palmetto.

With First National Bank, we said the cost savings would be $4 million. We achieved closer to $5 million. And with Palmetto, we achieved the full $14 million in savings that we anticipated. The balance of Palmetto's expense savings came in the second quarter, and that allowed us to add a significant number of new revenue producers in the first half of the year. As a result, in the second quarter we were able to absorb those costs, and produce strong financial performance with an ROA of 1.07%, a pretax pre-provision ROA of [1.70%], and an operating efficiency ratio of to 7.8%.

And all of this, I might add, with very little purchase loan discount accretion.

As well as meeting the strategic and financial goals we set for them, these acquisitions will continue to play key roles in the growth and profitability of our Company.

I want to take a moment to talk about the unique strategic opportunity we have in the very attractive coastal South Carolina market, and how Tidelands fits into that vision.

Tidelands is our third acquisition since last year. The first two have been fully integrated and now operate under the United Community Bank brand. We have talked about the outstanding success of our loan production office in Charleston. In only nine months of operation, Dixon Woodward and his team has generated an impressive $115 million in loan commitments, including $84 million in loan balance.

That is an extraordinary achievement and speaks volumes about the capability of our team. It also speaks to the opportunities in the market. Add to these skills and markets the Tidelands bankers, their capabilities and their seven full-service offices, then, I believe the growth opportunities are significant. And Tidelands has even more strategic value. It is immediately accretive to earnings because we did issue any shares in the merger.

As we turn to capital, our deferred tax asset gives us a distinct capital advantage by allowing us to build regulatory capital based on pretax dollars.

Keep in mind that we still have $116 million in disallowed deferred tax assets that will be added back to regulatory capital each quarter over the next two years as we use our net operating losses. We are generating regulatory capital faster than we can deploy it through organic growth, allowing us greater flexibility in our capital management programs.

Repurchasing shares when it makes sense is a great example. In March, we announced a $50 million share repurchase program to allow flexibility to repurchase outstanding shares. Beginning in mid June, we repurchased 764,000 shares at an average price of $17.88, totaling $13.7 million. This included 460,000 shares purchased during the second quarter. We will continue to be opportunistic with repurchases.

There is one other thing that I would like to mention before I update you on our outlook and open the call for your questions.

If we don't periodically take a look back, it's easy to miss the tremendous changes that have occurred in our loan portfolio, lending businesses, underwriting support, and senior credit management. Over the past five years, we have made significant and meaningful changes in our lending businesses. We've expanded our commercial lending areas while adding top lenders and experienced credit underwriters. This has led to greater diversification in our loan portfolio, both in product type and geography and a stronger credit underwriting team, both at the top and throughout all levels of underwriting support.

Also, we have built or specialized in the areas from the ground up with some of the top talent in Southeast. These are seasoned lenders with strong track records. They have joined United Community Banks along with their experienced credit underwriting teams. Together, they are driving us toward a solid future in these lines of business.

From a lending perspective, we are not the same bank we were five years ago. We are focused on organic growth within our community banks and specialized lending areas, supplemented from time to time with targeted acquisitions. We have a relentless focus on quality, diversity, geography, and building lasting customer relationships.

Now for a brief update on our outlook for the rest of 2016.

We remain optimistic about our earnings growth. Certainly our second-quarter results add to that optimism. We expect growth in loans and deposits to continue in the mid- to high single-digit range, although perhaps at the high end. Assuming no further rate increases by the Fed, we anticipate that competitive loan pricing pressures will continue to lower margin a few basis points through the remainder of the year. Our interest sensitivity position remains close to neutral, so we are in a good position to manage uncertainty in this interest rate environment.

Our expectation is that the favorable trends in credit quality will continue and will result in more low provisions for credit losses in the near term. We expect continued growth in our mortgage business as we add new originators and we expect our SBA business to drive further growth in fee revenue.

We expect to hold the growth rate in expenses below the growth rate in revenue, thereby continuing to achieve positive operating leverage. We expect to see our operating efficiency remain in the sub 58% range, and we believe we are still on target to achieve the 1.10% return on assets by year end.

Our second-quarter results has strengthened our optimism, and have led the Board to increase our dividend to $0.08 per share beginning in the third quarter. That's a 14% increase over our current dividend, and a 33% increase from a year ago.

And now, we will be glad to answer any questions.

(Operator Instructions) Brad Milsaps, Sandler O'Neill.

Maybe I will start with fee income on -- I know last quarter, some of the SBA gains were lower because of a higher number of construction projects that encompass the mix. I'm curious, did a lot of those fund and you're able to sell those, or was this just additional production that you still got that SBA construction piece coming down the pike?

This is Lynn. Really both of that, so we did have, number one, very strong production in the second quarter. But we also did have some construction loans mature during this time that increased our ability to sell. Our expectation is for another strong production quarter in the third quarter, so we would expect to be at about this level again in the third quarter and then up a little bit in the fourth quarter, again because our next block of expected construction loan maturities will be coming in the fourth quarter.

Okay, great and then just a follow-up on expenses. I appreciate all the color around the numbers and getting the cost saves out. Maybe expenses, we are still a little heavier than maybe I thought. I know you guys were reinvesting, but just kind of curious.

Any additional color there on maybe being able to accelerate the operating leverage? I know you gave guidance to that, but just kind of curious. Any other of those line items that would be a little heavier that would start to reverse out?

Brad, this is Rex. I will make a few comments on it.

As Jimmy noted on the salary line in particular, it did include [mirrored and four way] -- 401(k) increases, and additionally, it had commissions up because of our mortgage revenue was up considerably as well as performance incentives.

Now that we are back on track for the 1.10% ROA with a 1.07% ROA so I think you'll see those probably considerably consistent in the third and fourth quarter. I don't see it increasing.

When you look at professional fees, we had some additional work in our SOx compliance, DFAS, and mortgage area. I think those will come down by a few hundred thousand on a linked quarter going into third and fourth quarter. Advertising, as Jimmy noted, again was up due to campaigns. We had our customer appreciation day which we have 20-some more, almost 30 more offices now that are in that. If you look at that a year ago, we were up [$200,000]. So I see that coming down probably coming down by a couple hundred thousand on a linked quarter also, that run rate will come down over the balance of the year.

We continue to focus on looking at expenses. As Jimmy noted, our operating efficiency ratio is again sub 58%. If you take that in context of looking at it a year ago, we acquired two and fully converted two acquisitions, plus all the growth that we had, and still now back around to the efficiency ratio of even running pre-acquisitions.

And again, if you were to look back even a couple years further, we were well into the low 60% operating efficiency. So we continue to focus on managing expenses. I would add and probably would come up as a question, but Tidelands is coming in July 1, so that will come into our run rate. We talked about that previously and, again, that will add probably about $2.9 million a quarter in expenses.

We expect expenses to be flat, flattish going into next quarter, but we will have additional -- the run rate for Tidelands coming in. We convert that in November. And again, the full benefit of the $5 million will come in the first part of next year.

Great, thanks, guys.

Kevin Fitzsimmons, Hovde Group.

Appreciate the outlook on the margin in loan growth. Can you just -- putting those two together, can you talk about how you view NII, the prospect for growing NII, because that's the one, when I look at the quarter, that's the one thing that really wasn't there this quarter, NII basically being flat to down.

And I know there was a little bit of margin hit from accretion income coming down that might not happen each quarter. But just putting loan growth and margin together, how do you feel? How confident are you in the ability to drive NII higher, especially in this difficult rate and current environment?

This is Rex. Again, Jimmy had commented that we do expect some further margin compression, which really that is driven around, again, competitive loan pricing. We have seen our loan yields, as we have noted and talked about as you see in the deck, are flattened in the second quarter. So we don't -- we haven't seen it continually drop in April, May and June so it's holding in pretty well.

So again, we will probably pick up a little accretion through our acquisitions. Again, as I think Jimmy noted, one important point is that there is only a $0.5 million of accretion income coming in, compared to other banks. So it's minimal impact on our margin overall and our loan yield.

But again, I think we expect the margin to come down a little bit, but now I think we will see traction, back to your point on net interest revenue. I think we will see traction in Q3 and Q4 that will see net interest revenue increasing on a linked quarter basis going into the balance of the year.

Great, great, that's helpful. Thanks Rex. One follow-up. Jimmy, you mentioned M&A and just if you can give a little more color on that in terms of how the conversations are going and how seller pricing expectations are, and what you are all (technical difficulty) geography sweet spot maybe looking forward? Thanks.

Sure. Thank you for the question. Really, nothing has changed, relative to our overall strategy. Yes, conversations continued to occur. Certainly there's a number of incoming calls. There is a handful of institutions that, under the right financial circumstances, we would have a very strong interest in.

The geography is the same within the four states that we have talked about; could be in new markets, could be in markets that would create overlap, and obviously significant cost saves. The criteria is the same, as I mentioned a few moments ago.

Sizewise, just to kind of pick a number, we would feel comfortable probably between $500 million and maybe $2 billion what we will call our sweet spot. There would be a case possibly of being under the $500 million. Again, a lot of that is -- in fact all of that is strategic in our view. But also, I still think it's important, even with the M&A, that our focus is the organic growth route. We've been able to transform our Company now geography wise, that 90% of our footprint is in an MSA.

So, that in addition to the increased addition of lenders and new product lines within our specialized lending, I believe provides great opportunity as we move forward.

Great, thanks, Jim.

Jefferson Harralson, KBW.

I want to start with SBA pricing this quarter. Could you talk about the change quarter to quarter on the sale of SBA loans?

It was very steady. We are not seeing any compressions, really, minimal change at all in the gain on sale margins.

And what are you seeing in your pipeline or in your loan demand that push you to raise your guidance? I realize -- your loan growth guidance. I know you guys have beaten it a few quarters in a row here, but what are you seeing that gives you confidence that you can move to the higher end of your loan growth guidance?

There's really four things that make me confident there. One is the new hires. We brought on a new middle-market team, led by [Tommy Dimmitt] in South Carolina. I have been recruiting Tommy for three years. I knew how strong he was. He surprised me with how strong his team is. So, another two people came on with him. They are doing extraordinarily well.

Our new Senior Living Group, [Jennifer Lally], again outstanding group. Only been with us for a few weeks and they've already shown that they are going to exceed expectations. We have talked about Charleston, what's going on there. So we continue to be able to attract great people, number one.

Number two, our retail strategies, which we don't talk about a lot, are going very well. Had a great HELOC campaign. You can see the results of that. Our mortgage business, 20% of our production goes on balance sheet in variable-rate products. You don't see that as clearly because we are repositioning that portfolio a little bit and bringing the quality up. But that's going very well.

The third reason, we've got great coordination between our specialized lending group and our community banks. So that partnership is really -- makes me feel very confident the growth will continue.

And finally, the performance of the acquisitions is going very well. So you expect to see a little slowdown, but -- and which we did see in First National but that has picked back up. You can see good growth there.

Palmetto has gone very well out of the gate. Tidelands, we have already seen two relationships come into senior credit committee. So they are off to a stronger start than either one of the other two. So, a lot of reasons to feel good about it.

The only reason not to take the guidance up further is really maintaining credit standards. We've actually seen a couple of deals come in committee with commitments from other lenders, where we just said basically said, well, if you got that from somebody else, you don't get it, because we are not going to do it.

And of course, we had talked about for some time, multifamily commitments are down in multifamily at about a 16% annualized rate. So, just maintaining credit quality and just who knows about the general economy would be the only reasons we wouldn't increase the guidance.

All right, thanks. I'll ask Rex a quick one. What milepost should we expect on this Tidelands deal on the conversion? Do you need to make investments here, hire people to build it out? Or is it just --? We should just take over the revenue and the expenses, and then cut the expenses some time after the conversion.

Yes, Jefferson, it would be the latter. We don't really need to add to our internal operations, and we'd look at it more as the cost save coming out. But again, we are transitioning that through November, through the conversion. And again, as we have indicated in the past, that most of the cost savings will come really in the first quarter of next year. Late this year into the first quarter.

All right, got it, thanks guys.

Christopher Marinac, FIG Partners.

Thanks, Jimmy. Just wanted to expand on your M&A comments earlier. Do you have any particular delineation between privately held banks versus public entities?

Well, certainly we've had incoming calls on both of those. The general theme that I continue to hear are those banks that -- particularly in that $300 million, $400 million, $500 million range and maybe even a little larger than that, whether they are private or whether they are public continue to look at various alternatives. Certainly the operating environment is very challenging.

But what I see just time and time again that is probably tripping their thinking over to maybe selling is a liquidity event. Historically, and almost always within those banks, and particularly those that are privately held or sub-S, there's typically one, two or maybe three families that own a substantial interest. Many times, just the father or grandfather, and if they -- something happens to them, it goes to the children that live in the area. And therefore all of that creates a liquidity event. And so, that's kind of what I am seeing out there.

Great, that's helpful. And just a follow-up for either you or for Lynn, can you talk about Atlanta? It was very strong for you this quarter. Anything unusual there or would you imagine that pace can continue?

Nothing unusual there. Again, it really is a great example of coordination between specialized lending and community banks. So in addition to Atlanta's normal production, they had about three deals that were handshake deals with specialized lending, one middle-market deal, two asset-based lending deals.

So we are seeing better traction there and we would expect that to continue.

Sounds great, Lynn. Thanks very much, guys.

Tyler Stafford, Stephens.

Nice quarter, guys. Just one more for me on fee income. Was there something in particular that drove that other fee revenue line item up? Is that where the customer derivative income flows through?

This is Rex. Yes, there were several things coming through the miscellaneous fee revenue category. Customer swaps is one of the items. It was about $1 million this quarter, up well over $300,000 on a linked quarter basis. We had several of our other categories from wires, safe deposit, banking fees, hedge, all that are probably in the $300,000 to $600,000 range that were all up $100,000 to $200,000 spread across each of those. And we did have one settlement with an outside vendor and trust fees for $600,000 in that line item. We have items occasionally coming through there, odd items coming through. But that was the only odd one coming through.

Would you say the 4.3 is a good run rate for that?

For next quarter, we would expect it to be in that range, yes.

Okay. And then on the securities book, are you guys really purchasing any new securities in the portfolio now? Or should we see the security balances continue to decline?

You will see the security balances continue to decline. Currently, we are not purchasing any securities with Brexit in the low rates in the three-year to 10-year range. We don't see any real opportunity to continue to replace those securities and would rather see our loan mix increase as we talked about in the past.

So we will see both called bonds and/or runoff through the balance of the year reduce the securities portfolio right now.

Okay, thanks, Rex. And then Jimmy, just one more for me back on the M&A topic. Can you remind us what you are -- or the numbers around your reasonable TBV earnback are?

Basically we try to look within a three-year period. There could be a case where could be just a hair beyond that. But we would like to stay within that three-year period or sooner.

Okay, thanks, guys.

(Operator Instructions) Nancy Bush, NAB Research.

Jimmy, I have a question for you that maybe incorporates everything you said today. In looking at your stock, and the valuation, in the group of $5 billion to $10 billion Southeastern community banks, yours is the lowest valuation. And it has been there for a while.

Could you just reflect on that? And do you see one thing or two things maybe that investors are waiting for before they afford you a higher valuation?

Nancy, that's the first thing I think of when I get up and the last thing I think of when I go to bed. So it's a great question.

I think there's probably two or three components to that. One is, let me just back up and look at what's going on in the Company because we talk about efficiency ratio, and that's a spot number. And that's important.

But, if you just go back to the beginning of 2014, our efficiency at that time was over 63%. If you look back just the last 10 quarters, we have built specialized lending division, the SBA, we have significantly expanded mortgage, asset-based lending, CRE, middle market and now senior living. So that is a significant investment that we are making within the Company, along with the underwriting experts within each one of those product lines, in addition to the fact we've established and staffed an LPO in Midtown Atlanta, the same in Charleston.

So that's just a few of the investments that we make. Today, we see our efficiency, of course, at 57.8%.

So, yes, we have taken cost out of the Company, but we've also built a significant revenue-generating engine underneath. I think that something that maybe we've not done as good a job in continuing to explain that.

Secondly, I think the discount -- the loan discount accretion, when you look at our Company, relative to other peers in that peer group, we virtually have none and they have, typically, a significant amount.

That is not anything negative, it's just a fact. And then when you look at our pretax pre-credit as we continue to go up to that [1.70%] ROA, I think there is -- that is indicative of the continued strength within that.

Now, I would go back one other step. Again, we've got to do, I think, a better job of communicating this. But if you look at the peers, if you look at the EPS that they are generating and if you take the amount of accretable yield out of that EPS and look at that on an average, and look at United, you will see a significant similarity. And quite honestly, in several cases, an even stronger profitability structure.

So I think it's a combination of those. I think our Company, where we are today given the investments that we have made, looking at the future, looking at the opportunities within our markets, and certainly there will be other M&A opportunities along the way, I think United is at a significant value of opportunity for investors.

Do you think it's necessary to take a hiatus from deals, perhaps, to recognize this valuation before you go on? Or can you do both?

No, I think we can do both. In fact, if you go back and look, when we did the FNB and the Palmetto, if you look at the cost we've taken out of both of those institutions, which is almost $20 million, we have also -- we didn't stop there. We reinvested that. We got the cost out, we reinvested that in great markets that we believe will provide additional growth. We invested that in other revenue generators, and so we would not have been able to do that absent those two mergers. It's just that simple.

The same thing with Tidelands. I think Tidelands is one of the best acquisitions our Company has really ever made, given the existing team there, given the footprint as these two work together is going to be significant. It's going to be accretive to earnings.

So, I look at it very simple. We are going to focus on organic growth and we are going to build this Company that way. There will be an acquisition from time to time that hits those strategic elements that we think are very important to help grow and build shareholder value.

Okay, thank you.

Thank you and I am showing no further questions at this time.

Thank you, operator. Certainly appreciate all on the call today and your interest in United Community Banks. If -- any additional questions that you might have, don't hesitate to call us.

I do want to congratulate and thank our United Community Bankers for just an outstanding quarter and what you continue to do that drives the bottom line, but also drives our brand and our reputation.

Thank all of you for being on the call and we look forward to talking with you next quarter.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Have a great day, everyone.