United Community Banks, Inc.
Q3 2015 Earnings Call Transcript

Published: 27 Oct 2015

[Operator:]

Good morning and welcome to United Community Banks Third Quarter Earnings Call. Hosting our 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, core pre-tax, pre-credit earnings, and other non-GAAP financial information. For each of these non-GAAP financial measures, United has provided reconciliation to the corresponding GAAP financial measure I 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 third 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 on the Company’s Investor Relations section of United’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 risks and uncertainties described on Page 4 of the Company’s 2014 Form 10-K as well as other information provided by the Company in its filings with the SEC, and included on its website. At this time, I will turn the call over to Jimmy Tallent.

[Jimmy Tallent:]

Good morning, and thank you for joining us for our third quarter earnings call. First I want to thank all of you who attended our Investor Day Conference in Atlanta on October 8. We hope you gained insight into our company, our markets, our strategy and depth of our management team. For those unable to attend a replay of the webcast is available in the investor relations section of our website at ucbi.com. Now I will discuss the third quarter. Overall, I am pleased with our performance and especially haul that we are pleased strategically. Our team completed the systems conversion for First National Bank in mid-July, significantly expanding our footprint in fast-forward markets in Eastern Tennessee. For efficiency, we consolidated six branches that were overlapping as a result of the merger. Although we had been out of merger business for several years, our highly skilled banker’s execution of the First National merger was seamless. On September 1, we completed our second merger of 2015, this one with Palmetto Banc. As with First National this acquisition accelerated our expansion in an attractive market in this case Upstate South Carolina. Palmetto brings to us an excellent banking team ready to lead our growth there and state wide as strategic opportunities present themselves. In mid-August we had a successful offering of $85 million in senior notes, proceeds of which were used to finance the cash portion of the Palmetto purchase. Also on September 15, we redeemed $32 million in high cost trust preferred securities. So we have made good progress during the quarter enhancing our footprint in growth markets. Now, I will cover highlights of our financial results. Reported net income including merger-related charges was $17.9 million or $0.27 per share. The remaining discussions of this call will focus on operating performance that excludes the impact of merger-related charges. Net operating income was $21.7 million or $0.33 per share, that's up 14% from the third quarter of 2014. During the past two quarters, we maintained our operating return on assets and our 1% goal compared with 95 basis points a year ago. Our operating return on tangible common equity was 10.3% compared to 10.2% last quarter and 9.6% a year ago. Total revenue excluding the provision for credit losses was $84 million, up $12.6 million or 18% from a year. Our margin was 3.26%, down 4 basis points from the second quarter and 6 basis points from the third quarter of 2014. Solid loan production of $452 million for the third quarter brought year-to-date production to $1.4 billion. Our provision for credit losses was $700,000, down from 900,000 in the second quarter and from $2 million a year ago. Among other factors the declining trend in the provision for credit losses continues to be impacted by higher loan recovery levels of previously charged-off loans. Net loan charge-offs for the third quarter were $1.4 million compared with $1 million and $3.2 million for the second quarter of 2015 and third quarter of 2014 respectively. Our allowance to loans ratio excluding acquired loans was 1.37%, down from 1.42% last quarter. The addition of the First National and Palmetto loans, which have a purchase discount rather than an allowance for loan losses lowered this ratio by 22 basis points to a reported allowance ratio of 1.15%. Our non-performing assets to total assets ratio was 29 basis points, up 3 basis points from the second quarter, primarily as a result of the addition of Palmetto’s foreclosed properties. Fee revenue was up $1 million from the second quarter or 24% annualized. And all of our capital ratios remain very strong. Now, I will share some details from the core. As you can see on Page 5 of the investor presentation, core pretax pre-credit earnings were $35.4 million, up $2 million from the second quarter and up $5.1 million from a year ago. Our net interest margin was down 4 basis points from the second quarter, reflecting an 8 basis point decrease in our loan yield and the cost of the senior notes we issued in mid-August. The decrease in loan yield was influenced by the composition of floating and fixed rate loans within the loan portfolio, as well as continued pricing pressures. During the third quarter and consistent with the first two quarters of 2015, 70% of our loan production was in floating rates. This increase in floating rate loans has shifted our balance sheet to a more asset sensitive position, and has also created opportunities to improve our margin and net interest revenue through interest rate swap on our floating rate loans or securities portfolio, without significantly increasing our overall risk to rising rates. Also negatively impacting our margin this quarter was the issuance of $85 million in senior notes, which I mentioned earlier. They had an average rate of 5.2% and were used to finance the cash portion of the Palmetto acquisition. Partially offsetting this negative impact on our margin was $32 million redemption of our trust preferred securities, which paid an average rate of 8.4%. Combined, these transactions accounted for 2 basis points of our margin compression in the third quarter on a net basis. On the positive side we expect the full quarter benefit of Palmetto’s high yielding loan mix and lower cost to funds to partially offset further margin compression during the fourth quarter of 2015 and into 2016. Turning to loan growth and production; we grew loans by $53 million during the third quarter, this excludes the $796 million in loans acquired in the Palmetto merger. While net loan growth was down from previous quarters due to pay-offs, our 9% growth year-to-date is on target for 2015. Loan production remained strong at $452 million as shown on Page 7 of the investor presentation. Approximately $256 million was driven by our community banks and $150 million by specialized lending. Our leadership and talent investment in these areas continue to be both a financial and strategic win. Looking at third quarter loan production by categories; more than half of the production was in our C&I and CRE portfolios, similar to prior quarters. Commercial loans accounted for $250 million of the total production, down about $50 million from the record level achieved in the second quarter. Excluding Palmetto's loans, commercial production increased outstanding loan balances by approximately $31 million during the third quarter. Before I move on for the third quarter loan production, I want to take a moment to talk about our recently announced plans to exit the corporate healthcare business in Nashville. Early this month, we announced the sale of this business representing about $190 million in loans to a large regional bank. Although our talented Nashville team has been successful in developing larger positions and syndicated shared national credits, they had been less successful building the full relationship based business we had envisioned. As a result we felt businesses strengths were better suited for a larger financial institution. We expect the closing to be completed in the next several weeks. Proceeds from the sale will be invested initially in our securities portfolio, offsetting the majority of the net earnings impact. Over time, we will reinvest growth opportunities consistent with our strategy. We remain committed to serving the healthcare industry and our footprint with focus on the full relationship base business in which we specialize and excel. Moving on to interest sensitivity; our balance sheet remained asset sensitive at quarter-end. Our interest sensitivity modeling indicates that 200 basis point ramp up in interest rates over the next year will improve net interest revenue by 1.6%. We still hold a large balance of floating rate securities to help manage our exposure to rising interest rates. Floating rate securities accounted for 27% of our investment portfolio at the end of the third quarter. Before discussing fee revenue, I want to speak briefly about provision for credit losses. We have had two consecutive quarters of loan provisions for credit losses, as a result of abnormally low charge-offs and higher recoveries of previously charged-off loans. As a result of the sale of the corporate healthcare loan portfolio, as well as our projection for continued lower levels of net charge offs, the current level of provisions could continue into 2016. Next, you'll find the trends on core fee revenue on Page 5 of the investor presentation. Third quarter core fee revenue was $18.4 million, up $1.2 million from the second quarter with increases in nearly every category. Total service charges and fees owned deposit accounts were up $960,000 from the second quarter with increases in each of the three sub-categories. Mortgage fees were up $133,000 from the second quarter and $1.7 million from a year ago. The growth from a year ago reflects a solid increase in home purchase production, as well as our strategic focus on this business, illustrated in part by the addition of four sales managers and 19 mortgage originators in our metro markets over the past year, including six from the Palmetto merger. We closed $141 million in mortgage loans in the third quarter, up from $128 million in the second quarter and up $84 million from a year ago. 62% of the third quarter production represented home purchases and 38% was for refinancing activities. During the third quarter, we funded $26.5 million in SBA and USDA guaranteed loans, and we sold $17.8 million. Sales of SBA loans produced $1.6 million in fee revenue, that's up 10% from the second quarter. Selling portions of our SBA loan production and resulting gains in fee revenue are a core part of our SBA business strategy. Five quarters into this business we're seeing impressive results and we believe the outlook for future growth is strong as well. Growing fee revenue generating businesses continues to be a strategic focus as we’ve grown our business mix. I’m very pleased with the progress we are making in this area. Core operating expenses are on Page 5 of the investor presentation. As a reminder, our presentation of core operating expenses excludes market value adjustments to our deferred compensation plan liability, severance charges, and foreclosed property costs; and also excludes merger-related charges of $5,740,000 during the third quarter and $3,170,000 in the second quarter. The merger-related charges are primarily advisory fees, systems and conversion cost, and professional fees. We have included a reconciliation of core operating expense in the investor presentation. Core operating expenses were $48.8 million, up $3.6 million from the second quarter; Palmetto September operating expenses account for approximately $2.7 million of this increase. At quarter-end, we had 1,927 employees, up 283 from the second quarter. The acquisition of Palmetto added 290 employees. Our operating efficiency ratio for the third quarter was 57.8%. Now I want to take a moment to talk about our acquisitions. As I previously mentioned, we completed all systems conversion for First National Bank in mid-July. This First National Bank was an end market merger with significant branch overlap, our plans call for closing and consolidating six branches. All six branches were closed in August, and all expected staff reductions have occurred. We closed our merger with Palmetto on September 1 and they are now part of United. Palmetto’s results for September are included in our quarter-end results. Last quarter I discussed the strategic importance of this merger and today I want to comment on the closed corporal similarities between our companies. I am reminded of just how important that is because these banking teams will work together to become what, to become united if I may. If you didn't know better, you would think that been part of the same team for many years. Watching this unfold and having the opportunity to participate with them has been nothing short of an inspiration. We have scheduled Palmetto systems conversion for late February. We selected this date due to the upcoming holiday schedules and other activities, but also recognizing the need for extra time to complete this important job carefully and successfully. Timely completion of systems conversion is important to us, but not as important as making sure we do it right. Our conversion teams meet regularly to make sure we stay on pass and to avoid any disruption for customers. I'm very proud to welcome First National and Palmetto to United and I am excited about the tremendous opportunity we have together to further grow and enhance our footprint. Before we open the call for your questions, I want to provide a brief update on our outlook. We expect loan and deposit growth to continue in the mid to high single digit range. We expect continued growth in fee revenue from our mortgage and SBA lending businesses. We anticipate a slight decline in our margin due to a shift to floating-rate loans and ongoing competitive pressures on loan pricing. Loan growth should offset most of the impact of margin compression leading to modest growth in net interest revenue. The work required to achieve our expected expense savings from the First National Bank transaction was completed in the third quarter. And the full benefit of our expense run rate will be reflected in the fourth quarter. Expense savings from the Palmetto acquisition will be fully realized starting in the second quarter of 2016. Excluding the effect of the mergers, we expect modest expense increases, but at a slower pace than revenue growth. Overall, we continue to be optimistic about our earnings growth. As we mentioned last quarter, the acquisition of Palmetto pushes us closer to the $10 billion mark. We project that the earliest period of financial impact from the Durban amendment on our interchange fees will be the third quarter of 2017. We're focused on identifying opportunities to offset a portion of this impact with various projects related to fee revenue generation and expense and efficiency improvements, as well as selective acquisitions. In summary, our third-quarter financial results are a reflection of the hard work and dedication of United bankers. They face every challenge with determination and every opportunity with a can-do spirit, and execute our strategy flawlessly. They make me proud every day to be part of this organization. Now we will be glad to answer your questions.

[Operator:]

Our first question is from Jennifer Demba with SunTrust. Your line is open.

[Jennifer Demba:]

Thank you. Good morning.

[Jimmy Tallent:]

Hi, Jennifer.

[Jennifer Demba:]

Hi, so after you exited the healthcare portfolio in National, do you have any remaining share in National credit on your book, after you have done that.

[Jimmy Tallent:]

Rob, you want to handle that question.

[Robert Edwards:]

Sure. The answer is yes. We have a number of – I don’t have, let me see. Track exposure at this nick level. So it would be – it’s about half of our shared national credits; the ones – so we would have 380 total of which the 190 what we have.

[Jennifer Demba:]

Okay. Are you – I assume they’re in market, can you kind of characterize…

[Robert Edwards:]

Jennifer, we have a corporate business, calling on middle market customers in the C&I space. It is in footprint and integrated into our markets. And loans will be much smaller typical size in terms of the total credits, so they’re much more likely to be club deals or just barely in the syndication arena versus healthcare, which were much larger total credit sizes.

[Jennifer Demba:]

Thank you.

[Operator:]

Thank you. Our next question is from Michael Rose with Raymond James. Your line is open.

[Michael Rose:]

Hey, good morning guys. How are you?

[Jimmy Tallent:]

Good morning.

[Michael Rose:]

Good morning. I just wanted to kind of clarify the comments on expenses. It seems like with the conversion happening in February, I think you said all the expense savings would be kind of in run rate by the end of the second quarter if that's correct? Do you have a baseline for what you expect that run rate to be approximately?

[Jimmy Tallent:]

Sure, Rex?

[Rex Schuette:]

Yes, Michael. When you look at our current quarter in the current quarter backing out merger charges were about $48.6 million as Jimmy indicated. Looking at that as he also noted there was about $2.7 million or so for Palmetto expenses for the month and the quarter. And if you normalize that it means that we’re going to add about another $5.5 million, $5.4 million in Q4 to our run rate; and looking at the $2.7 million that pretty much reflects about a little over $1 million in savings already as you recall, Palmetto at a run rate of about $10 million a quarter. And again, we see a few more expenses coming in Q4, but again we’re down about $1 million, $1.1 million already in run rate going into Q4, and the balance of it which would take about $2.6 million more savings, we expect that to come right at the end of the quarter after conversion late February. And by the second quarter run rate we will be down another $2.6 million on run rate from what I just mentioned on a linked quarter basis from Q1 to Q2 next year.

[Michael Rose:]

Okay, that's very helpful. And then I think you said that you’d expect the provision to kind of run over the next few quarters, how it has over the past maybe two, how should we think about, I understand the purchase accounting, but how should we think about the absolute level of reserves to loans and I’m obviously cognizant that you’re still having recoveries, and you probably still expect some reserve release, but is there a level of worry, I don’t know it’s below 1% or wherever it maybe, I think it’s kind of a bottom.

[Robert Edwards:]

So this is Rob Edwards again. We look back eight quarters to – for our allowance levels, eight quarters of our quarterly losses and when we go back probably 13 years our median is right at 134, and so we’re at 137 right now. We would expect the range to be 25% up or down from that 13 year, rolling eight quarter average.

[Michael Rose:]

Okay. And I guess that we you added any or if you made any changes to the qualitative factors?

[Robert Edwards:]

Well, we continue to look at the qualitative factors, so that would be part of the process in addition to the eight quarter losses. As you can imagine and Jimmy mentioned it earlier, our credit losses continue to improve, so year-to-date we’re at 13 bps in credit losses, which is a far price on 137.

[Michael Rose:]

Okay. Just one more from me, you guys have done a good job around the indirect auto portfolio, it’s about 7% of loans at this point, but we’ve seen some banks pull back in that sector as of late, are you seeing any kind of warning signs, and then is there a level at which you wouldn’t wanted to exceed as a percentage of the total portfolio?

[Robert Edwards:]

So we do have some portfolio strategies established and we’ve said previously and continue to believe we’re at a good level as it represents – as you said 7% of the portfolio, so we would expect it to continue to remain in that range. We have not seen any segregation of quality that continues to perform very well. We have – our average FICO score in the indirect book is 740, so it’s a strong performance and we expect it to continue.

[Michael Rose:]

Great. Thanks for taking my questions.

[Operator:]

Our next question is from Kevin Fitzsimmons with Hovde Group. Your line is open.

[Kevin Fitzsimmons:]

Hey guys good morning.

[Jimmy Tallent:]

Good morning.

[Kevin Fitzsimmons:]

Just wanted to follow-up on the margin outlook. From what I recall at that Investor Day just earlier this month you guys had talked about the margin being more stable looking out and you're talking about slight compression, just want to – just maybe splitting hairs here, but just want to get a sense has something changed or is it just more when you talk about roughly stable this – just kind of is in line of that. Thanks.

[Rex Schuette:]

Yeah Kevin, Rex here. It’s kind of in line with what we said earlier in October at our Investor Day conference. And probably is in this next quarter and the 1 to 2 basis point compression fairly stable. We still have a continued as we talked about in the Investor Day conference pricing pressure and again our mix continues at about the two thirds, the 70% in floating rate, which on average is coming in at about prime plus 25. So that mix continues to put pressure on the margin overall and as we know it also, you know the debt issuance is reflected now in the margin, so that 2 basis points is in the run rate. The TARPs redemption will offset the full quarter benefit of the senior debt that was issued in the quarter, so to say about that same level with respect to the debt impact on the margin.

[Kevin Fitzsimmons:]

Got it, got it. Rex, thanks. That’s helpful. Just quick question, please if you can remind us what is the outlook or the game plan for the small amount of preferred stock that you guys have which I believe is from the FNB acquisition, how should we be thinking about that in the preferred dividends going out in the future quarters? Thanks.

[Rex Schuette:]

Yes, that is related to the FNB acquisition, it's just under $10 million. In March that rate would go up from 1% to 9%, so our plan would be to fund that internally with cash we have on hand to repay that in the late first quarter of 2016.

[Kevin Fitzsimmons:]

So that’s former SBLF or SBLF, that’s what it is?

[Rex Schuette:]

Yes, small business.

[Kevin Fitzsimmons:]

Okay. Thank you, guys.

[Operator:]

Our next question is from Brad Milsaps with Sandler O’Neill. Your line is open.

[Brad Milsaps:]

Hey good morning guys.

[Jimmy Tallent:]

Hey Brad.

[Brad Milsaps:]

Jimmy, I appreciate all the color on loan growth, just curious on the production numbers if you can maybe give us a little more color, pretty equal with last year, but maybe a step down from the second quarter, is some of that just you know you guys being busy with getting the Palmetto deal closed within the fold now do you expect that number to maybe return closer to second quarter number above a $0.1 billion a quarter or any additional color there would be helpful?

[Jimmy Tallent:]

Sure. Lynn?

[Lynn Harton:]

So, one piece, if you look at Slide 7 on the deck is healthcare. So healthcare you can see, or already in the third quarter was beginning to run down as we changed the strategy there and that also impacted net loan growth as well, which you wouldn't have in front of you. But we actually shrank in the third quarter in the healthcare book for even parts of the sale as opposed to about $25 million – about $5 million as opposed to about $25 million growth in the second quarter. So that healthcare loan was a big piece of the delta. The other pieces to think about kind of say you always have kind of one quarter or so where you're adjusting from being internally focused to outwardly focused, we expected that and you'll see that those numbers for the third quarter in the Tennessee down a little bit, we would expect that to bounce back up. At the time, we expect and had planned for the same kind of situation for Palmetto. So you know to me you would see a similar quarter to the third quarter in the fourth quarter, and then first quarter getting back on that traditional run rate as you mentioned.

[Brad Milsaps:]

Great. And Rex just curious, do you have a sense for kind of how some of the – this kind of accretion will flow through you know, kind of on a quarterly basis, we’ll be pretty consistent with the third quarter, even though they [indiscernible] sort of multiplying it by three, but will it be fairly consistent or how are you guys kind of thinking about that?

[Rex Schuette:]

Yes. That would be fairly consistent to the month running through for the quarter, it’s about $200,000, so that run rate carried out for the fourth quarter.

[Brad Milsaps:]

Okay. And then just kind of one housekeeping question do you have the CDI number for the quarter? I know you mentioned there was kind of lot of the increase in other, but just was curious if you had that exact stat in the release?

[Rex Schuette:]

You’re right. That’s a little over 700,000 for the quarter. And it’s primarily by the 100,000 as FNB and roughly 174,000 that is a Palmetto increase in second quarter.

[Brad Milsaps:]

Okay. And that just reflects one month. Okay great. Thank you.

[Operator:]

Our next question is from Nick Grant with KBW. Your line is open.

[Nick Grant:]

Hey guys, congrats on a nice quarter. A quick question on the SBA business. Looks you’re your margins were down slightly in the quarter, can you guys discuss what trends you are seeing there and kind of how we should look at that moving forward? Thanks.

[Robert Edwards:]

So, some of that is impacted by the fundings. We have – about half our production is in construction. If you look at gross production we were up in the third quarter, we produced gross production $41 million versus $36 million in the second quarter. We expect a pretty good increase in the fourth quarter, fourth quarter is always a strong quarter in SBA. So we feel very good about it. The gains this quarter of course were up from last quarter, and that in the face of a little bit smaller margins if margins had held equal to second quarter, our gains would've been probably $150,000 greater. So we feel – continue to feel very, very good about SBA.

[Nick Grant:]

Okay thanks. How do you see that margin holding moving forward, like in 4Q, should we still be around this 9% range or do you see a chance to elevate that?

[Robert Edwards:]

It’s hard to predict, it has firmed up a little bit in the last few days, so we’re hopeful – we don’t think it will be below the third quarter. And it could firm some from there.

[Nick Grant:]

Okay. Great. Thank you.

[Operator:]

Our next question is from Nancy Bush with NAB Research. Your line is open.

[Nancy Bush:]

Good morning. Jimmy a question for you, I guess it get back to the healthcare business that’s been sold. I will just ask, what you saw in that business originally that made you enthusiastic about it and what developed that may do less enthusiastic about it, and has this sort of been a learning experience?

[Jimmy Tallent:]

To begin with Nancy, the move into the healthcare space with the people that we have, we still believe that was the right thing at the right time. What we were hoping to achieve is a higher percentage, a more relationship banking versus the syndicated credits. We just felt that given the size of those loans, given the lack of the relationship field opportunity, given the narrow margin on that piece of business and TARP allocation all of those kind of things is probably a better utilization of that capital. Great team, credits were very solid, but when you look at the size of those the return, unlike the remainder of our snick book that Jennifer asked earlier about that book, that remaining book basically has relationships that come from that business. So therefore it was just a strategic decision that we felt was in the best interest of what we wanted to achieve and we can invest that in other areas we think will be much better long term.

[Nancy Bush:]

Are there any other sectors out there that this experience would keep you away from or is it not a sector issue, it’s a portfolio issue? That’s what I’m trying to get to.

[Jimmy Tallent:]

It’s not so much a sector – this was an area that we felt very comfortable as we went in and the fact that our strategy was the – almost the opposite somewhere in the 50% to 70% and a relationship arrangement and a much a smaller piece of that in the syndicated credit. So, I wouldn’t say, a lesson learned as much as it just did not fit the strategy that we felt was in the best interest of the company long term. And certainly through that process, sure we learned things, but at end of the day what we did and how we exited we're pleased with it.

[Nancy Bush:]

And I would also ask, just cutting away the acquisitions and everything in the quarter, how do you feel about the underlying sort of tenure of the business right now, I mean we’re getting all sorts of indications all over the place the things are softening and we had mixed results with some of your peers. How do you feel about your underlying business?

[Jimmy Tallent:]

Well, the pricing on the lending side continues to get very competitive. And really not a surprise with that, I think maybe volume wise I would say my instincts would tell me in the banking side, community banking side, I would say it's a little softer than in the specialized arena, that continues to be very solid and very pleased with that aspect. But you know we’re in an environment where typically most of us banks have our cost of funds as low as we can get that, you’ve got your loan book turning over. It’s a – we believe a smart to put that new loan production in as much floating-rate lending as can preparing for the rates to increase. And as a result of that certainly it's still a very challenged environment.

[Nancy Bush:]

Okay. Thank you.

[Operator:]

Thank you. And our last question is from Christopher Marinac with FIG Partners. Your line is open.

[Christopher Marinac:]

Thanks. Good morning. Jimmy, Rex, and team I was wanting to just get back to the SBA question, I know you covered this a little bit at the Analyst Day a few weeks ago, but with the gain this quarter, does that give you any more visibility into how the next couple of quarters may look with what we see this slightly reduced level of gain percentage?

[Robert Edwards:]

Again, it’s really firm back up in the last few days. It really weakened right around the time of the Fed meeting and then in the decisions on rates or what rates we’re going to do. We don't think again this is going to go below the third quarter level, and we think it could firm up as well.

[Christopher Marinac:]

Okay. Very good. And then Jimmy at the tail end of the analyst meeting a few weeks ago, there was this discussion about M&A as pertains kind of metro versus non-metro, and I guess I was curious in terms of what you are seeing in terms of the difference in pricing between the two and does that all way in terms of your interest level and looking at one versus the other?

[Jimmy Tallent:]

Well pricing expectations of course continue to move up, Chris. I think the pricing in rural markets I suspect would be the less than certainly the metro markets. Our focus continues to be or our biased would be in metro markets as we have been focused on that for a long time. We have totally transitioned the company, where about 70% of the footprint now resides in an MSA supported by very strong deep market share of our legacy markets. But you know, there's still a lot of opportunity out there. We’re very strategic in our thinking as far as continue to enhance and build our franchise. I think when you look at FNB and the in-market overlap cost saves that could come out increase visibility add to bench strength in that market and then when you look at Palmetto, the strategic initiatives there, they really accelerated us into the Upstate South Carolina in a very meaningful with a fabulous team, that's the type of – I guess that would be the flavor of our strategy in the M&A arena.

[Christopher Marinac:]

Okay. Very well. Thanks for the background there.

[Operator:]

Thank you. And I’m not showing any further questions. I’ll now turn the call back over to Mr. Jimmy Tallent.

[Jimmy Tallent:]

Thank you, operator. And thanks all of you for being on the call today. We sincerely appreciate your interest, your questions with UCBI and certainly look forward to speaking with you again soon. I want to thank all of our employees of this company for your continued hard work day in and day out. So thank all of you and hope you have a great day.

[Operator:]

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