United Financial Bancorp's (UBNK) CEO Bill Crawford on Q3 2016 Results - Earnings Call Transcript

| About: United Financial (UBNK)

United Financial Bancorp, Inc. (NASDAQ:UBNK)

Q3 2016 Earnings Conference Call

October 19, 2016 10:00 ET

Executives

Marliese Shaw - Executive Vice President, Investor Relations

Bill Crawford - Chief Executive Officer

Eric Newell - Chief Financial Officer

David Paulson - Executive Vice President and Head, Wholesale Banking

Analysts

Mark Fitzgibbon - Sandler O’Neill

Collyn Gilbert - KBW

Matthew Breese - Piper Jaffray

Dave Bishop - FIG Partners

Operator

Good morning, everyone and welcome to the United Financial Bancorp, Inc. Q3 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Marliese Shaw, Executive Vice President of Investor Relations. Please go ahead.

Marliese Shaw

Thank you, William. Good morning, everyone. Welcome to our third quarter conference call. Before we begin, we would like to remind you to read our Safe Harbor advisement on forward-looking statements on our earnings announcement. Forward-looking statements, by their nature are subject to risks and uncertainties. Certain factors that could cause actual results to differ materially from expected results. Our comments today are intended to qualify for the Safe Harbor afforded by that advisement.

And now, I would like to introduce Bill Crawford, our Chief Executive Officer.

Bill Crawford

Thank you, Marliese and thanks to all of you for joining us on today’s call. United Financial Bancorp continues to make progress in the third quarter of 2016 toward our four key objectives, which you will find on Page 5 of our investor deck. Executing on these four key objectives will help us build a better bank and improve shareholder value.

In the third quarter of 2016, we saw significantly improved linked quarter performance in net interest income, non-interest income, non-interest expense and asset quality. And our effective tax rate came in below target which Eric Newell, our CFO, will explain in his comments. All of these factors contributed to our record quarterly earnings of $0.28 per diluted share in the third quarter of 2016. In addition, we reduced our loan to deposit ratio, reduced borrowings and increased deposits. Average interest earning assets were up slightly, average loan yields increased and total funding cost was flat.

Comparing the third quarter of 2016 to the third quarter of 2015, United’s results reflect flat adjusted operating non-interest expenses and 11% or $5 million of operating revenue growth. Our GAAP and operating earnings per share are now equal. During this time period, loans increased by 12% and deposits have grown by 10%. United increased tangible book value per share to $10.60 from $10.39, that’s linked quarter growth of 2% or 8% annualized after paying our $0.12 per share dividend to our shareholders. The dividend provided a 3.56% annualized yield to our investors for the quarter. United’s third quarter of 2016 return on assets or ROA was 88 points and the company earned an 11% return on tangible common equity supported by a 2% annualized non-interest expense to average assets ratio and a 59.5% efficiency ratio. Asset quality improvement is reflected in the non-performing assets to total asset ratio or NPAs declining to 55 basis points and net charge-offs declining to 5 basis points.

Our retail banking team increased checking units sold by 41% compared to the third quarter of 2015. With regard to lending, point-to-point loan growth was flat compared to the linked quarter, but average earning assets were up slightly. Our commercial, consumer and mortgage banking teams had improved their average relationship risk adjusted return on capital or RAROC. What this means is we are earning an improved risk adjusted return on equity with lending relationships. We think improved loan relationship pricing and low cost core deposit acquisition is very important to improving long-term profitability and preserving strong capital and liquidity ratios. We expect to see loan and deposit growth in the mid to high single-digits in 2017 and aligned with organic capital generation. While the operating and interest rate environment remains very challenging for banks, the United Bank team is focused on receiving customer expectations, improving financial performance and building long-term shareholder value.

I will now turn the call over to our CFO, Eric Newell, for more detail on the quarter’s results and then we will take questions.

Eric Newell

Thanks, Bill. Good morning. Operating net income totaled $14.1 million in the third quarter of 2016 which is a notable increase over the second quarter operating net income of $10 million. GAAP and operating earnings per share of $0.28 per diluted share in the third quarter is a dramatic improvement over the linked quarter as well as an improvement from the comparable period in 2015. Our four key objectives are taking hold and beginning to generate more progress in the company’s financial results.

First, loan growth in the quarter was muted, but this was by design. Note that residential loans declined by $42 million in the linked quarter and by nearly $62 million from the comparable 2015 quarter. As we seek opportunities to remix our loan portfolio into higher yielding assets and allocate capital resources to assets which will maintain and grow the company’s ROE, the result is the decreased allocation of capital or residential loans on our balance sheet. We remain committed to this business line despite our desire to sell the majority of its production. Pricing strategies have been shifted to ensure that conforming loan products is the bulk of the company’s production in this area which provides a greater opportunity to sell to our secondary market investors.

While investor and commercial real estate loans increased by 2% during the quarter, successes in C&I loan originations also continued, the results of which will become more prevalent in future reporting periods. The returns on capital or ROEs of the investor commercial real estate loans being originated are accretive to the commercial line of business as well as the aspirational ROE of the company. In order to achieve the company’s targeted ROE we must remain disciplined in our market with regards to both pricing and credit structure. As a result, we have walked away from over $0.5 billion of loan origination opportunity this year that was well structured, but did not meet the company’s pricing requirements. This pricing constraint will maintain investor commercial real estate at the current level and that segment of the portfolio may even decline as a percentage of total loans as we grow other more beneficial sleeves in our loan portfolio that are not as sensitive to the flat yield curve. Both home equity and other consumer loan balances are expected to improve the growth rate from their linked quarter and the comparable quarter in 2015.

The yield on interest earning assets improved 4 basis points to 2.67% from 3.64% in the linked quarter. This is attributed to the mix shift I discussed just now and also due to the fact that 40% of our loan portfolio is tied to prime and LIBOR indexes in addition to exposure to the LIBOR in the investment portfolio. This exposure was built throughout 2014 and ‘15 to improve the asset liability mix and to become more neutral to changes in the interest rates. While we saw some benefit this quarter in asset yields, the cost of funds was flat. In the fourth quarter, I expect a marginal increase to the cost of funds when shorter term wholesale funding turns and reprices at higher short-term rates. We have been beating the drum on the competitive nature of deposit pricing on our markets for sometime now and it’s becoming more aggressive. We see pricing for new money balances and money market accounts at 2% and CD specials between 1.25% and 1.5% for 14 to 23 month money. This pricing is 25 to 35 basis points richer than comparable Federal Home Loan Bank advance rates. Our ability to grow low cost core transaction accounts is critical to maintaining our NIM in the face of the pricing competition we see and we do not expect that to be anytime soon.

As Bill mentioned, we are seeing some early indication of successes in our retail banking channel on account openings and our commercial bankers are having conversations everyday with our existing clients and leading discussions with new clients conferring about deposits. I am confident that you will see more progress in low cost core deposits growth on both the commercial and retail fronts. Provision expense was slightly higher this quarter than the linked period despite no loan growth. This increase was driven by purchase accounting. A notable amount of loans moved from the purchase portfolio to the covered portfolio, which requires allowance coverage. We are comfortable with our allowance level. It covers more than 100% of our non-performing loans and is a stable level for the covered portfolio. Asset quality metrics remained very favorable and there is no evidence of developing weaknesses in any of our portfolios.

Notable progress was recognized during the quarter with regard to the four key objectives which is achieving greater non-interest revenues from core banking fees. Core fee income as opposed to interest rate affected mortgage banking and derivative income has an expectation of being more consistent and predictable. Fee income was a bright spot for United this quarter. Over the last two quarters, management has communicated to analysts and investors that the second half of 2016 would reflect improved dynamics in service charges and fee income. The company experienced a significant increase in service charges and fee income on a linked quarter basis. That on a level is relatively flat in comparison to the third quarter of 2015. However, the composition and drivers of that segment of income were dramatically improved year-over-year.

Loan level hedging income or interest rate swaps income was the major driver in the third quarter of 2015, representing $2.4 million of nearly $6 million service charges and fees in that quarter. In this past quarter, loan level hedge income was 29% of the 2015 level. Accordingly, the third quarter of 2016 reflected improved core banking fee income and account analysis fee revenue from our commercial clients as well as dramatic improvement in wealth management revenue. Wealth management revenues, which are seasonably high in the third quarter was 129% improved over the comparable 2015 period.

Expense management and maintaining an attractive cost structure, one of the company’s key objectives is the core competency for the company and the quarter’s results demonstrated improvement in expense metrics for this quarter as well. Non-interest expenses to average assets were 2% for the quarter although the company is aspired to since the merger in 2014. The headwinds in achieving this goal were notable. The company has made large investments in shared service areas to better support our customer-facing team members, so they may provide optimal customer experience as well as remaining with our potential regulators.

On a side note, the company completed its safety and soundness and information technology examinations in our third quarter. Through this transition, the company optimized 10 branches, consolidated and closed loan production offices and took actions to align the human capital organization to support our business and customers effectively. In order to support our growth initiatives, the company has been investing in information technology team. This investment will allow for better project management and technology focused initiatives and for delivery of modeled revenue and efficiency objectives quickly. The investments the company is making in IT began in the second quarter of this year and will level out in the first quarter of 2017.

The company’s year-to-date tax rate is 8.1% which is below the prior forecast of 15%. There are many inputs in fee calculation of an effective tax rate, the biggest of which is the level of calendar year pretax income that is expected and we expected that number to be higher in 2016 than what has actually occurred. So when we sized our tax credit investment that we made this year, that was on the assumption to target the effective – the forecast of the effective tax rate of 15%. But because of lower spread income than what we initially expected at the start of the year, our effective tax rate is lower. We have not need additional tax credit investments to achieve this lower tax rate.

Lastly, our forecast table in the press release deck indicates expectations for the fourth quarter. Stability is what we expect. We do not foresee anything dramatically different in the fourth quarter and in the most recent quarter. Fee income may come back a bit due to seasonality in our wealth management business but we will remain at an improved level from what we reported in the first half of 2016 for total non-interest income. I do not expect that we will be able to report incremental improvement on our NIE line at 2% of average assets as a floor there.

I will not be providing a specific forecast for 2017 until our January earnings call, but again stability is what we expect. I believe we can achieve a stable net interest margin from the currently reported level. Purchase marks are not expected to be meaningfully – will not contribute meaningfully to the margin in 2017. Mid to high single-digit loan growth and expense control will remain in place. There will be some natural increases in the company’s expense base with non-interest expense to average asset ratio increasing modestly in the first half of the year, whereas average assets grow, that ratio should migrate back down to 2%. And finally, as I stated in the beginning of 2016, I expect the effective tax rate to be around 15% for the foreseeable future.

Thank you for your time this morning. And the management team and I will be happy to answer any questions you have.

Question-and-Answer Session

Operator

We will now begin the question-and-answer session. [Operator Instructions] And our first questioner today is Mark Fitzgibbon from Sandler O’Neill. Please go ahead.

Mark Fitzgibbon

Hey guys. Good morning.

Bill Crawford

Hi Mark.

Mark Fitzgibbon

Bill, you mentioned in your opening comments that you are sort of driving toward your ROE target, could you share with us what that is and how long you think it might take to get there?

Bill Crawford

Mark, I think what I described was the ROE to be actually achieved. So we achieved 11% return on tangible common equity. As far as setting targets in the future, we will cover that on our first quarter earnings call in 2017 once we are completely through our budgeting process.

Mark Fitzgibbon

Okay. And then Eric, I know you mentioned that you were going to give some more guidance on the tax rate on next quarter’s call, but is it likely that you will make more tax credit investments in 2017?

Eric Newell

We will take actions to do what we need to kind of be around that 15% effective tax rate in 2017, which could include making more investments, yes.

Mark Fitzgibbon

Okay. So if we were sort of modeling out the net loss on LP investments, do you think it would be something similar to the level that we saw this year?

Eric Newell

How about this, I think I have tried to give more of a forecast on total non-interest income run rate versus actually getting into the specifics on the loss on the limited partnerships. So I would look at – on Page 7, we have forecast for the fourth quarter in that range of $28 million to $32 million. So I would kind of anchor to that number.

Mark Fitzgibbon

Okay. And then lastly, could help us think through how much more shrinkage we are likely to see on the resi mortgage portfolio?

Eric Newell

Sure. I think that – I think this year, what you are seeing is probably indicative of what you will see next year. And the reason for that it’s very measured because that portfolio is used for collateral and for our Federal Home Loan Bank advances. So we are taking a very measured approach in how we are bringing that portfolio down and we aspirationally want to kind of just compare to our peers when it comes to residential for total loans. And I think at this point, we are higher than many of our peers. But that’s a many year process. I mean you are probably looking at 3 years to 4 years and we are in the first year there.

Mark Fitzgibbon

Thank you.

Operator

[Operator Instructions] Our next questioner today is Collyn Gilbert from KBW. Please go ahead.

Collyn Gilbert

Thanks. Good morning gentlemen. Just tying into that comment Eric, on the resi mortgage and kind of a slow gradual process, could you just give a little bit more color around how you are thinking about the evolution of this loan growth and kind of how the composition of it unfolds into next year, I guess thinking mid single-digit is a pretty good growth rate given the slowdown in resi, maybe a more cautious growth rate on some of the CRE buckets, so – and again maybe there was accelerated pay down that occurred in the C&I book this quarter that saw the drop, but just wanting to try to understand a little bit more on how you see this growth sort of path evolving?

Bill Crawford

I think first and foremost, C&I and owner occupied CRE will be our focus. I will remind everyone on the call that we have made significant investments there in teams, going back to 2014 and those folks are all C&I bankers. And it takes a lot of time for them to kind of be running at a full run rate and I think we are starting to see that now. So those folks have been on the ground and been with us for now we are going on to 24 months, so I think you are going to see a much more meaningful contribution to C&I growth. But be mindful of the fact that it’s smaller loan sizes and more complicated relationships to transition from their existing banker bank to us. So that’s something that – that’s the reason why it takes time. Home equity is an area of focus for us and consumer is also another area for us, because of growth for us in 2017. And the reason for those – our focus on all of those asset classes and the loan portfolio is because many – much of there is adjustable and it’s not as sensitive to that two times spread. So, I mean, investor CRE is not an area of growth for us, but that doesn’t mean that we are not originating it. I think if you look at our loan portfolio, we have $1 billion of that kind of runs out a year of cash flow every year. So, we are mindful of the pricing sensitivity in the investor CRE and that’s why we have kind of deemphasized it this year just because there is a lot of competition for those assets and they are just not meeting our ROEs.

Collyn Gilbert

Okay. Okay, that’s helpful. And then just shifting to the reserve outlook, so what was the – you did have a big pay-down in the non-covered loans. Just sort of speak to what was going on there? And then also to maybe how you are thinking about reserve build kind of maybe a little bit over the long-term and just sort of the sufficiency of the reserve as it stands today?

Bill Crawford

Yes. So, what was the pay down, but there is certain actions that can – it’s in the internal accounting policy, but there are certain actions that happened to loans or portfolios that would make us take something from the purchase portfolio that has no allowance and move it into the covered portfolio, which does have an allowance. And so that was – there is just certain things that happened that met our internal policy requirements to say, okay, we are going to put it into our covered portfolio and that’s the reason for the change. In terms of the guidance on the provision, we have been providing a range of average assets and annualized provision to average – actually loans, I apologize. So, the forecast was provision to average gross loans. The range that we have been providing for a while now is between 27 and 30 basis points. The reasons – as those loans – as we have a lower level of non-covered loans, I would expect that we would be on the lower end of that range versus the higher end, that 30 basis points was in an effort to not only provide for the loan growth that we have at the top of the house, but also the shift of the purchase portfolio into the covered portfolio. In terms of adequacy, I think we are well covered. We are over 100%. I think we are over 100% for the first time since the merger on our MTAs. The covered – the allowance to covered loans were at, I believe it’s 1.03%, which is very comparable to what we have been showing for the last five quarters. And then if you look at just the overall allowance to total loans which would include some of the purchase loans, but that’s a comparable measure to all of our peers. We are certainly improving there starting at, I think we had, that was like 58 or 59 basis points. Now, we are having 8 handle on it and you will see that, that measure will eventually get closer to 1% just like most of our peers.

Collyn Gilbert

Okay. Okay, that’s helpful. And just the portion that you guys shifted this quarter, what was the or maybe what portion of the provision was tied to making the shift from the non-covered to covered?

Eric Newell

It’s difficult to tell you exactly of the total provision how much was driven by the change from the purchase to the covered and the reason that’s difficult is because there is the whole allowance methodology that we are using and there is different pools of assets that were coming over. And so there are different provisions or allocations depending on the type of asset and the situation. So, I would say that I continue to standby the 27 to 30 basis point guidance.

Collyn Gilbert

Okay. Okay, that’s helpful. Got it. Okay. And then just one final question, do you – obviously, the cash balance increased this quarter, I presume from some of the deposit inflows on the muni side, do you not anticipate some sort of NIM – I don’t know what the timing of when those deposits came in, but maybe some NIM benefit happening in the fourth quarter then because of sort of the mix shift out of the cash into loans? And is that factored into your NIM guidance?

Eric Newell

The cash is considered in the NIM guidance being flat, yes.

Collyn Gilbert

Okay. Okay, great. Alright. I will leave it there. Thanks, guys.

Bill Crawford

Thanks, Collyn.

Operator

[Operator Instructions] Our next questioner today is Matthew Breese from Piper Jaffray. Please go ahead.

Matthew Breese

Good morning, everybody. Just curious on the commercial account analyst review, what was that and what did that result in and was any of the impact relative to fee income, any of the impact one-time?

Bill Crawford

Matt, it’s Bill Crawford. What I would say is we have been focused on generating more core banking fees through products and services and how we work with our bankers. And so, I don’t believe there is one-time stuff there. I mean, we think that the stuff that is used will be recurring.

Eric Newell

Yes, I mean just add to Bill’s comments, if you look at the fee income back from the comparable quarter in 2015, loan level hedging fee income was I think $2.4 million of the $6 million roughly and this quarter loan level hedge fee income was 29% of that. So, you can see that the composite, I mean that one item which is more volatile and less predictable is not contributing anywhere near what it was contributing in 2015. And so when you look at the fee revenue it’s repeatable and it’s more stable than what we are seeing in previous years. In terms of what caused that increase, as we have been talking about in the first half of this year, we were – we had identified that when we comped ourselves to our peers in terms of deposit fees to deposits, we were an unfavorable outlier and so we took actions and we studied for 6 to 9 months where we stood and where our competition stood. And we have said that we were going to make some changes to improve that ratio and I think you are starting to see the early fruits of that.

Matthew Breese

Okay. And then you noted that there has been some increased deposit competition, just curious what segment of the banking market large cap, mid-cap community banks, where is it coming from and how much impact has it had on your own deposit pricing so far?

Eric Newell

I think it’s broad-based. Being a New England bank, I am sure this isn’t lost on anyone listening, but it’s very competitive up here. We are very over banks and we have, I believe, last time I looked New England had the least favorable loan-to-deposit ratios in the nation. So, when folks are growing and they want to grow deposit base, sometimes they have to pay out for it. So, I would say it’s broad-based and it certainly impacts us. We, Brandon Lorey and I who oversees retail, we have a lot of discussions about our strategy there and really working to preserve the deposits that we do have as well as developing tools and methods and incentive programs to help our customer-facing folks have discussions with their customers and clients to help them understand the value proposition and why they should be banking with United and it’s not always rates. Rates certainly helps, but there is a deeper value competition that goes beyond that and that includes products and other solutions.

Bill Crawford

And Matt, another thing thus far strategically is we slowed down loan growth. We could really kind of make loan growth. You can dial in a number and get a certain loan growth that we wanted. But it really comes down to how do we fund efficiently and so you have actually been funding more efficiently at lower loan growth and working on relationship pricing and that’s how we are – in part how we are driving a better net interest margin.

Matthew Breese

Okay. Now, thinking – and tying that into some of your other commentary which was broadly speaking more stability in 2017 and adding on to that guidance of mid to high single-digit loan growth. My gut would be that deposit pricing is going to creep up a little bit. Your own deposit pricing might creep up a little bit and that the margin would suffer a bit, but I wanted to run that kind about you and hear what you had to say. Is margin pressure in ‘17 going to continue?

Bill Crawford

Well, how about this, I mean I think we are trying to give a fairly wide range between mid single-digit and high single-digit. And we will look at the market at that time. The thing we are really trying to do is aligning loan growth with low cost core deposit growth and organic capital. And so I mean if the market is giving up the condition where we are tearing up our NIM, then we would go at the lower end of that range. If we can find ways to fund efficiently as we continue to get better growing low cost core deposits and we generate stronger earnings then we might be at the higher end of that range. So it will – the reason we are giving you a range is it’s going to depend on what the market is giving us.

Eric Newell

I also would add that while our cost of funds may increase next year, you are also going to see an increase in the earning asset yield because of the shift that we are making on the composition of our loan portfolio. That’s why I think I indicated in ‘17 – in my prepared comments in ‘17 I think we are going to have a fairly stable operating NIM from where we are.

Matthew Breese

And then if you can talk about the loan to deposit ratio, where that might shake out over the next 12 months, where do you think that could go?

Eric Newell

I think we will stay in the range that we are at. 100% is comfortable for me.

Matthew Breese

Got it, that’s all I had. Thanks for taking my questions.

Bill Crawford

Thanks Matt.

Operator

Our next questioner today is Dave Bishop from FIG Partners. Please go ahead.

Dave Bishop

Hi, good morning gentlemen.

Bill Crawford

Hi, how are you?

Dave Bishop

Just wanted to follow-up maybe shift the focus a little bit more on the loan side Eric spoke about, just not about the deposit but the pricing competition, are you seeing any sort firming or improvement in risk adjusted pricing at least on the loan side, some of the segments you are focusing on?

Bill Crawford

On the investor CRE, I would say, we have been really working with our customer facing folks and the bankers to help them understand what we are looking for as I believe that that has born with some successes in improving the ROEs of the investor CRE. Like I said in my prepared comments, we have also – there was $0.5 billion paper that was well structured, but we walked away from it because it didn’t meet our pricing requirements there in that sleet. But I think in the – I will probably let Dave talk about C&I in terms of pricing there.

David Paulson

I mean at the end of the day, there is very difficult competition out there especially on the C&I side, because that comes with a long commensurate investment or contribution of deposits. But as Bill referenced earlier and Eric talked about what we walked away, we have been very, very thoughtful about using our pricing model and deciding what we want to obtain from a target and the targets that we are setting on business that’s acceptable to us instead of a much higher level than it was historically. And so while we may be doing less by in terms of units, in terms of the number of transactions, we are actually making materially more return on those transactions and that’s just some sort of guiding focus in terms of bringing the loan velocity down a little bit, but making more money on each transaction. So it’s really been disciplined around how do we get those ROEs, when we can and when it make sense.

Bill Crawford

I am sorry, you broke out, I didn’t hear your question.

Dave Bishop

Yes. Just curious in terms of just the nature of loan demand out there within your regional footprint there, just curious in terms of what accelerated and relatively stable, declined over the course of the past three months?

Bill Crawford

I will let Dave.

David Paulson

Yes. I mean the benefit of our – we have a pretty significant footprint throughout New England and so what you have to do is look at more transactions to be successful. The demand is there. It’s softer than we would like and when you look at transaction especially in C&I space, we are seeing industry wide and we are subject to that same industry phenomenon, lower utilization online with credit. So it’s a relationship business that you have to be out there, working really, really hard to get the few transactions that are worth doing and don’t chase the ones that aren’t worth doing at the bottom of the pool. And so demand is tough because there are fewer good opportunities out there which means you have to be looking at a lot of opportunities and we are doing that.

Dave Bishop

Great. Thank you.

Operator

Our next question today is a follow-up from Collyn Gilbert with KBW. Please go ahead.

Collyn Gilbert

Thanks. Eric, I just wanted to follow-up on two things, one is as you were talking about a mix shift benefit coming in ‘17 with kind of the remix of the loan book into more adjustable rate product, are you assuming a rate hike into that comment, because I guess I would think that some of the longer term resi mortgages are running off are carrying probably a higher yield than what you would be putting on the books, so why I guess quality obviously is better and you get the funding benefit and all that, but I am just trying to think of the asset yield composition and if you are thinking there is going to a rate hike in that assumption?

Eric Newell

No, we do not assume any rate hikes that assumption.

Collyn Gilbert

Okay. So the yield on some of the C&I products even though with adjustable rate is going to be better than what is rolling off?

Eric Newell

Well, it’s not going to – I did say adjustable rate there and there is certainly a factor in there, but there is also some fixed rate that would exist there. And if you do look at some of what’s running off in the residential portfolio, what we are originating at and what was running off was actually, fairly similar, believe it or not because that portfolio, we have been selling anything we can since what, I believe 2012, 2013. So the duration of that portfolio is pretty short, shorter than you - what you might expect. So I think when you look at how we are trying to move into more C&I and more home equity or consumer, you are looking at more favorable yields there relative to what you might get in a investor CRE deal at this point.

Collyn Gilbert

Okay, that’s helpful. And then just one, I just wanted to clarify, on the fee income side, the derivative swap income, you were saying this quarter was 29% of the level it was in the year ago quarter, is that right 29% of that $2.4 million to this quarter was just under $700,000, is that, right?

Eric Newell

Correct.

Collyn Gilbert

Okay. And do you have what it was in 2Q ‘16?

Eric Newell

It was flat.

Collyn Gilbert

Okay. Flat to that $700,000, roughly?

Eric Newell

Yes.

Collyn Gilbert

Got it, okay, super. Thank you.

Operator

This concludes our question-and-answer session. I would now like to turn the conference back over to Mr. Bill Crawford for any closing remarks.

Bill Crawford

Okay. Well, thanks for being on the call today. And as always I want to thank my United Bank teammates just for their relentless focus on taking care of customers and our communities. And we hope you all have a good day and we will talk soon. Thanks.

Operator

The conference has now concluded. Thank you for all for attending today’s presentation. You may now disconnect your lines.

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