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United Financial Bancorp Inc (UBNK) Q1 2019 Earnings Call Transcript

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United Financial Bancorp Inc  (NASDAQ: UBNK)
Q1 2019 Earnings Call
April 17, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day and welcome to the United Financial Bancorp Incorporated's First Quarter 2019 Earnings Call. All participants will be in listen-only mode. (Operator instructions). After today's presentation there will an opportunity to ask questions. (Operator instructions). Please note, this event is being recorded.

I'd now like to turn the conference over to Marliese Shaw. Please go ahead.

Marliese L. Shaw -- Executive Vice President and Investor Relations Officer

Thank you, Shawn, and good morning, everyone. Welcome to our first quarter conference call. Before we begin, we would like to remind you to read our Safe Harbor advisement and forward-looking statements on our earnings announcement. Forward-looking statements by their nature are subject to risks and uncertainties. Certain factors could cause actual results to differ materially from our 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 and President.

William H. W. Crawford -- Chief Executive Officer

Thank you, Marliese, and thanks to all of you for joining us on today's call. Today, I'll make a few high-level comments and then turn the call over to our CFO, Eric Newell. Clearly this was a tough quarter for United Financial Bancorp. Funding pressure and an accounting change impacted the net interest margin and earnings, despite strong loan growth.

By now you've seen our updated disclosures on D.C. Solar. The fraud alleged by the US Department of Justice against the D.C. Solar companies and several of their affiliates appears to have been perpetrated against other financial institutions that were investors as well.

Eric will get into more detail regarding the D.C. Solar situation, but I want to emphasize that our institution remains well capitalized with strong credit quality, liquidity and strong interest rate risk management. The current yield curve in repricing deposits certainly created a difficult operating environment for many banks.

United will remain focused on its four key objectives, while expanding customer relationships and building new ones. We have a very talented team of bankers focused on supporting our customers and communities. I want to take this opportunity to thank our United Bank employees for their steadfast focus on serving both of those constituencies.

I'll now turn the call over to Eric Newell, our CFO.

Eric R. Newell -- Chief Financial Officer

Thanks, Bill, and good morning. Yesterday, the company reported earnings for the first quarter of 2019 of $0.25 per diluted share, which compares to the linked quarter earnings of $0.24 per diluted share and $0.31 per diluted share reported in the comparable quarter of 2018. I'll discuss some of the highlights of the quarter in a moment.

First, I'd like to discuss our subsequent disclosure and further information as it pertains to three investments the company has made into limited liability funds, all of which are borrowers of and lessees to two related companies D.C Solar Solutions and D.C Solar Distribution respectively.

The two D.C Solar companies and several of their affiliates filed for Chapter 11 bankruptcy in late January and early February 2019, following allegations of fraud by the US Department of Justice. On learning of this news, United along with other equity investors and funds managed by the same managing member and council have acted in concert to protect and defend our interest in the Bankruptcy Code.

Due to lack of financing for maintain ongoing operations of these companies, the ambiguity around actual inventory and existence and the limited information on company affairs as a result of the government's seizure of records, each of the bankruptcy cases was converted to Chapter 7 in March.

At this time, United believes the loss is probable, but the company is currently unable to measure the extent of the loss. If the allegations set forth in the government's affidavit prove to be accurate, the total exposure is $41.7 million, a capital impact. This total exposure is composed of the carrying value of the partnerships on the company's balance sheet, the tax credits associated with placing the inventory into service, as well as the tax loss flow though benefits and finally, the effect of revaluing deferred tax assets to pre tax reform levels from the current statutory tax rate.

Factors that may assist United in measuring the loss include but are not limited to certainty and clarity of actual inventory and our funds, better understanding of how and when United's funds will be able to take possession of the inventory, gaining clarity on a true valuation of the inventory which drives the tax credits and the carrying value and a better understanding of the fund's ability to relet the inventory to maintain the in-service status.

The disclosure in our press release, that provides investors the ability to see a capital impact on our regulatory ratios that the company recognized a full loss on March 31. As you can see, we remain well capitalized for PCA standards and capital level strongly support the balance sheet.

Now back to the quarter's results. The biggest catalyst is our net interest margin. As expected, we had a five basis point impact due to the adoption of an accounting standard at January 1 in which the company now recognizes premiums over the time to a call date versus final maturity.

This accounting change impacted yields in the company's municipal investment portfolio. The good news here is that, the company subsequently completed two repositioning exercises during the quarter, reducing the effect of the lower yields in this portfolio going forward. The market provided a deleveraging opportunity during the quarter in which the company sold $120 million of investments that will be used to pay off FHLB funding with limited impact to future income and positive impact to tangible equity.

The cost of funds increased notably in the quarter due to the decisions that company made in the fourth quarter of 2018 and anticipation of as much of the market had priced in rate hikes throughout 2019. Obviously, the facts has changed and the guide was already casted in our strategy. Once the market's expectations were limited or no rate hikes took hold, we saw some of the shorter duration market rates fall slightly, impacting the increase linked quarter on our LIBOR based loans. We have been able to price down our deposit rate special several times over the last several months and there'll be opportunities to reduce rates on our money market deposits through the second and third quarters. This is all to say that the pricing pressure has eased a bit which should be helpful for the cost of funds.

Further, the FHLB cost has eased a bit as well as we have generally managed our portfolio to be relatively short, which should likewise be helpful to the cost of funds. The yield curve is not conducive to strong asset growth at the moment. So you'll note that, we have slowed our asset growth forecasts from the prior quarter. And I would expect us to be at the lower end of that range. The company continues to reprice its loan portfolios up from runoff of lower yields into higher yields reflecting current market rates, which is helpful for the earning asset yield overall.

In our non-interest income categories, of note would be the reduced level of mortgage banking income in the quarter, which was impacted by a $1 million decline in our mortgage servicing rights valuation due to the decline in interest rates in the quarter, having an effect of assuming a higher prepayment speed in our servicing book. Additionally, the company did not recognize any loan swap fee income during the first quarter.

In our non-interest expense lines, most are down linked quarter due to the one-time items that occurred in the fourth quarter of 2018 that were not going to repeat in the first quarter. First quarter generally have some seasonality to it as it pertains to resetting of employment taxes, which will burn off as the year progresses. And the company experience high health claim activity in the first quarter that created an unfavorable variance as well.

Finally, in our tax line, you'll note that I have changed the forecasts for the year to have a higher effective tax rate than our last call. We've decided that due to capital allocation reasons, we would like to use our capital for relationships that drive deposit growth versus using it for alternative energy tax credits and therefore our activity of tax credits will be down versus prior years and our effective tax rate will be higher.

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

Questions and Answers:

Operator

We will now begin the question-and-answer session. (Operator Instructions). Our first question comes from Mark Fitzgibbon with Sandler O'Neill and Partners. Please go ahead.

Mark Fitzgibbon -- Sandler O'Neill and Partners -- Analyst

Hey, guys. Good morning.

Eric R. Newell -- Chief Financial Officer

Hey, Mark.

Mark Fitzgibbon -- Sandler O'Neill and Partners -- Analyst

Just a follow-up on a couple of quick points that you had made. Can you help us think about what the timing might look like on the DC solar? When you might get a sense from the bankruptcy trustee and be able to make a determination of what the loss looks like?

Eric R. Newell -- Chief Financial Officer

That's a difficult question to answer. Obviously, the greater clarity we can get on those items that we're looking to get clarity on, the better we'll be able to put a range or identify some type of loss, which I did say, we do think is likely. But I don't want to put out a time frame there. But, obviously, we want to get clarity and identify something as soon as feasibly possible.

Mark Fitzgibbon -- Sandler O'Neill and Partners -- Analyst

But do you think it's a 2019 event that you get that clarity or it could be further?

Eric R. Newell -- Chief Financial Officer

We -- myself and a team of people at the bank, we work on this every day. So the facts and circumstances change very frequently. So we're continually evaluating based on new information that comes in, whether we feel there's more clarity. And once we do have that clarity, then we will certainly alert our investors.

Mark Fitzgibbon -- Sandler O'Neill and Partners -- Analyst

Okay. And then, on the effective tax rate. So it sounded like the effective rate is going up not only because of the loss of impact from the DC solar, but perhaps reducing other tax credit investments. Are you selling them or you just letting them run off or -- can you help us with that as well?

Eric R. Newell -- Chief Financial Officer

Yeah, certainly. It's a capital allocation decision. We're really looking to drive deposit growth ultimately and some of that we need to use our capital on the lending side to drive the deposit activities as we feel that would be good for franchise value. So we're not explicitly selling any of our tax credits. Just the effect going forward is going to be less than what we had done in previous years.

Mark Fitzgibbon -- Sandler O'Neill and Partners -- Analyst

Okay. And then lastly, I know there's some seasonality in the fees and services charge line, but it look like it was down a little bit more than is typical. Is there anything unusual in that?

Eric R. Newell -- Chief Financial Officer

I think the seasonality that really drive is driven by that non-sufficient funds fee income. Year-over-year it is down a little bit, but certainly on a linked quarter basis we feel the impact that's generally the highest in the fourth quarter. So that was driving a lot of the change. Also I don't -- I feel like there's probably not been many quarters in last several years where we have had no swap activity. This is the first quarter that that's occurred. So there was nothing recognized in the first quarter. That were the effect of -- and I believe that the fee income from swap activity sits in that line.

Mark Fitzgibbon -- Sandler O'Neill and Partners -- Analyst

Thank you.

Operator

Our next question comes from Brody Preston with Piper Jaffray. Please go ahead.

Brody Preston -- Piper Jaffray -- Analyst

Good morning, everyone. How are you?

Eric R. Newell -- Chief Financial Officer

Good. Hi, Brody.

Brody Preston -- Piper Jaffray -- Analyst

Hi. So I just want to go, start with your NIM guidance sort of implies some stability from here. And I just wanted to get a sense, Eric, I know you -- you sort of mentioned some of the deposit competition abating this quarter. Is that what's driving your sort of flattish NIM outlook from here or is there something else?

Eric R. Newell -- Chief Financial Officer

Yeah. I believe it's -- if you kind of look at the earning asset yields, we are still seeing some benefit of assets that we originated in a much longer interest rate environment. Those are repricing or that flow that's coming off, whether it's prepayments or scheduled payments. Those assets are moving into our market rate. So we still feel like even without any additional rate changes you're going to get some benefit on the earning asset side. You certainly have that same concept with some of our deposits as well. Whether it's -- they're in CD that was originated in a lower rate environment, that's going to reprice to our current rate. But I think one of the things that had really been driving a lot of our deposit expense increases through the last six quarters has, first, been market changes, the market is not expecting that, so we can kind of cross that off the list. And a lot of the specials, whether it's money markets where you have pool of money that can have an outsized impact. We've been able to really hold back on that. It's still fairly competitive in our markets when it comes to money market rates. We still see a lot in the 2.35% to 2.5% range, but we've been pretty successful on keeping our rate lower than in that range on money market. And then we've been -- I think we've probably two or three or maybe even four times now through the quarter, we've reduced our CD rates that we're offering, as well as our competition. So the competition has eased a bit in our markets.

So you have the effects of that as well as our wholesale funding or FHLB, while it's lower as a percentage of total funding now than it had been in previous years. It is still fairly considerable amount relative to our total funding and we manage that book at between three and six months. So FHLB rates are down as well a little bit. So I think that that's what's really driving the stability this year on our NIM guidance -- our forecast.

Brody Preston -- Piper Jaffray -- Analyst

Okay. And then I guess turning to loan growth, CNI was pretty solid. And you mentioned sort of maybe some of the reallocation of capital toward growing these relationships to help grow deposits. Is that what sort of drove some of the growth this quarter or is there anything else that's driving that? And trying to get a sense for how you think it will shake out for the rest of the year?

Eric R. Newell -- Chief Financial Officer

Yes, certainly CNI is definitely a focus of ours and it has been for several years. We've have also -- Bill has talked from time to time about our lending center, our business process to better serve our small business and business banking customers through the origination channel, which we also believe is going to be helpful in driving deposit growth.

But certainly, the CNI has a longer -- has a higher pull in the times, so it takes all a lot of time and effort sometimes over a year where it will get clients that come -- join us on the lending side as a customer and then it takes them some time to bring their deposits over.

So we're certainly enjoying the benefits of that and there were wins this past quarter on the CNI side in terms of deposit growth and we want to continue that. And on -- certainly on the consumer side, we do have the de novo branches that we opened in Fairfield County, as well as downtown Hartford. And we have seen some strong early growth on both the consumer as well as the commercial side in leveraging our expanded footprint there.

Brody Preston -- Piper Jaffray -- Analyst

Okay. Okay. And are there any additional costs that you guys are bringing out of the mortgage operation or is that all been sort of accounted for at this point?

Eric R. Newell -- Chief Financial Officer

Yeah. In terms of the repositioning into the direct channel versus the retail channel that we have been in, that's I would say 99% or 100% big. So there's no additional expenses from that repositioning exercise and we continually will evaluate that line of business to ensure -- certainly want to serve our customers, but we also need to be prudent in allocating expenses and capital that line of business and hopefully, find that there's some additional changes we need to make, we'll certainly consider that.

Brody Preston -- Piper Jaffray -- Analyst

Okay.

Eric R. Newell -- Chief Financial Officer

But none are contemplated at this time.

Okay. And I guess going back to the swap fee income. Are you noticing a change in any of your commercial customer behavior that may be driving the lower swap fee income? And I guess, are you -- in your budgeting are you budgeting for a rebound in that line item or...

Well, if you look at that curve, most commercial customers are probably looking for certainty. And if I was borrowing, I don't want to go as long as possible, because in fact it's probably cheaper to go priced off five, seven year right now than being priced off LIBOR. So certainly, we want our customers to go as short as possible right now and our customers generally want to do the opposite that what we want from a balance sheet perspective. So, I think that's what's been driving the lower volume there.

We certainly expect some level of that (inaudible) in terms of our swap fee income, so it's now like we're expecting that to be zero for last year, but it just happened on previous quarter, no deals were closed.

Brody Preston -- Piper Jaffray -- Analyst

Okay. And could you guys share any initial thoughts on CECL now early in the 2019? And if you have any estimates of perhaps the impact of CECL on your reserve moving forward?

Eric R. Newell -- Chief Financial Officer

Sure. That's a process that -- we have a team working on. I've been very focused on that for the last 24 months. We are right about -- we're about to embark on a model validation process. So our model has been, I would say, fairly finalizing and certainly there might be some feedback. So once we finish that validation process, we'll feel comfortable to disclose perhaps something probably in our 10 -- our Form 10-Q likely in the quarter that ends September 30th. So we will probably -- we'll put some estimate out there. It's just a little bit early yet. We want to go through that model validation process first.

Brody Preston -- Piper Jaffray -- Analyst

Okay. All right. And then last one for me. In the past you guys talk about reaching a 1% ROI goal sort of by the end of this year. Given this quarter's results and outlook, just wanted to gauge what your long-term profitability goals are? And if 1% is still something you guys see as possible?

William H. W. Crawford -- Chief Executive Officer

Hey, Brody, it is Bill Crawford. I think if you look at our forecast and do the math and see that a 1% at a 10% effective tax rate is not in that forecast. We are looking at our operating plan, strategic plan and looking at how we can -- we continue to improve profitability in this very difficult environment. So I think our forecast stands for itself.

Brody Preston -- Piper Jaffray -- Analyst

Okay, great. I really appreciate your time guys. Thank you very much.

William H. W. Crawford -- Chief Executive Officer

Thanks.

Eric R. Newell -- Chief Financial Officer

Thank you.

Operator

Our next question comes from Collyn Gilbert with KBW. Please go ahead.

Collyn Gilbert -- KBW -- Analyst

Thanks. Good morning, guys.

William H. W. Crawford -- Chief Executive Officer

Hi, Collyn.

Collyn Gilbert -- KBW -- Analyst

Eric, if we could just start off on the tax situation. I just want to make sure I understand some of this. So, the $8 million or so that you guys have referenced that could be at risk of reversal I think. How are you coming up with that estimate? What gives you clarity on that estimate, but yet the rest of it is more uncertain?

Eric R. Newell -- Chief Financial Officer

Yeah, Collyn. So I think you're referring to the subsequent event disclosure in the K. Correct?

Collyn Gilbert -- KBW -- Analyst

K. Yeah.

Eric R. Newell -- Chief Financial Officer

So in that disclosure we commented about the carrying value of $90 million, in that $8 million was what's called the recapture risk. So when you place these -- this inventory into service, it needs to be in service for IRS standards for the tax credit for five years. And so, some of these assets hasn't been in service for five years and that recapture risk is the -- at that time was identifying the risk. If we had taken -- if all of the inventory was taken out of service as of the date, I think I don't know -- I think we had said either the date of the K was filed, our 12/31 (ph). I don't have it in front of me. So think of that as the inventory is being taken out of service at that time, but it was initially put into service. And then, in the K we also, I think we mentioned $18 million or -- I don't have it in front of me, that was a larger number which would be a total reversal of all the tax credits that we've experienced or we've recognized in prior periods. That would assume that inventory was never placed in the service for the IRS regulations. So think of the $8 million as a subset of that $18 million.

Collyn Gilbert -- KBW -- Analyst

Got it.

Eric R. Newell -- Chief Financial Officer

Does that kind of clear that up for you?

Collyn Gilbert -- KBW -- Analyst

Yeah. It does.

Eric R. Newell -- Chief Financial Officer

So when you add the $18 million and the $19 million, you get something that's smaller than the number that we put out today, which is the 41.7. And what having had more time to study the impact on the balance sheet. If we were to experience a total loss, there's a deferred on our balance sheet that's related to the these investments and that deferred was repriced down to the statutory tax rate of 21% last year with reform. But a lot of these deferreds occurred free tax reform. So there's actually an adverse impact of about $4 million to $5 million by writing the deferred back up to the statutory tax rate. And so that's the differed element that bridges -- we didn't contemplate that concept in our 10-K disclosure. But we contemplated it here in this updated disclosure.

Collyn Gilbert -- KBW -- Analyst

Okay. So that was going to be my next question. With a change in the DTA on a linked quarter basis, so that's why the DTA balance changed, because of the...

Eric R. Newell -- Chief Financial Officer

No. So none of this has actually impacted our balance sheet as of yet. This would be all pro forma.

Collyn Gilbert -- KBW -- Analyst

Okay.

Eric R. Newell -- Chief Financial Officer

The reason -- I think the reason that our DTA changed linked quarter was due to the unrealized loss on our balance -- our balance sheet from the investment portfolio, dramatically changed in that quarter. And I think that has an effect in our DTA line.

Collyn Gilbert -- KBW -- Analyst

Got it. Okay, Okay. Okay. And then just wanting to understand, so the updated guidance on the tax rate of the 14% to 16%, that does or does now include the assumption of loss forward tax benefits on DC Solar?

Eric R. Newell -- Chief Financial Officer

It does not.

Collyn Gilbert -- KBW -- Analyst

It does not. Okay. So the 14% to 16% is just simply just your others -- your other tax investment strategy plans? Not anything related DC Solar. Okay. And have you -- I mean if we think about the $19 million on a go-forward basis, if you do not get those tax benefits, what that would do to your tax rate?

Eric R. Newell -- Chief Financial Officer

The tax rate -- I'm thinking through the answer, how to answer this question. The $19 million is simply -- it's fairly disconnected from the go-forward tax rate. The $19 million was representing some of the tax benefit in prior periods. So if we had to impair the $19 million, it wouldn't affect our go-forward tax rate.

Collyn Gilbert -- KBW -- Analyst

Okay. So even though -- Okay. So there's not $19 million of current tax related investments that you have on the balance sheet?

Eric R. Newell -- Chief Financial Officer

No, there are. But we're using an equity method of accounting for those.

Collyn Gilbert -- KBW -- Analyst

Okay.

Eric R. Newell -- Chief Financial Officer

So, once we look at the future cash flows of that -- those equity investments and understand what they truly will be, that would be what would affect the carrying value of those investments.

Collyn Gilbert -- KBW -- Analyst

Okay. Okay. And then one final question as it relates to the tax strategy. So, with the new guide of the 14% to 16% tax rate, do you have any clarity as to what we should assume on the LP loss line?

Eric R. Newell -- Chief Financial Officer

I know that in prior year or quarters, I have provided some forecasts on that. I would just say that our current forecasts on the total fee income line are between 36 and 38. We obviously stand by that, because that's what we just put out. So I would put -- I would look at some of the other line items and then just back into that LP loss. It should be a little bit lower this year than prior years because of the lower level of investment we are making.

Collyn Gilbert -- KBW -- Analyst

Okay, OK. Got it. And then just on the growth that you guys saw this quarter on the installment line. Just curious what specifically within that consumer book was driving that growth? Kind of what your outlook is there on -- within that portfolio.

Eric R. Newell -- Chief Financial Officer

I'd say -- installment line, do you mean other consumer?

Collyn Gilbert -- KBW -- Analyst

Yeah. Hold on --

Eric R. Newell -- Chief Financial Officer

Yeah. I believe that's OK. That's (Multiple Speakers)

Collyn Gilbert -- KBW -- Analyst

The $425 million?

Eric R. Newell -- Chief Financial Officer

Yeah. That would be some growth, seasonal -- seasonality we see in our marine lending unit, where we have some retail loan origination. We generally see some origination in the first quarter. Everyone likes to buy their boats in the winter.

William H. W. Crawford -- Chief Executive Officer

Hi, Collyn, this is Bill. I think most of our growth going forward you'll see it in a -- lot of it in the commercial area of CNI, some real estate, some small business and consumer will be slower.

Collyn Gilbert -- KBW -- Analyst

Okay. I first -- Marine, for some reason I was thinking you guys were holding the Marine portfolio flat. I didn't realize that you were still looking to grow that?

William H. W. Crawford -- Chief Executive Officer

No, we're not looking to grow. It's seasonal, so you would see that number come -- some of that come down in the fall and then comes back in the winter.

Collyn Gilbert -- KBW -- Analyst

Got it. Okay, So balances more or less for the year should be fairly flat within that.

William H. W. Crawford -- Chief Executive Officer

Right.

Collyn Gilbert -- KBW -- Analyst

Okay.

Eric R. Newell -- Chief Financial Officer

I think that the total Marine, whether it's retail or fore planed is 2%, 2.5% of our loan book.

Collyn Gilbert -- KBW -- Analyst

Okay. Got it. Okay. And then just finally, just tying this back to you guys talked about reallocating capital to some of the deposit initiatives. Can you just talk a little bit more about that in sort of where you see just overall deposit growth going this year and kind of where you see the composition of that being?

Eric R. Newell -- Chief Financial Officer

Certainly, a couple of the initiatives that we've been allocating capital to are de novo branches, whether it was Crenshaw, West Port or Downtown Hartford and we're seen some successes there. And the reason that we wanted to embark on that strategy is that, we did have a loan production office for many years in Fairfield County and we saw that our lack of presence there for those customers loans get prohibiting their ability to have a deposit relationship with us. So we've been able to leverage our existence down there over the last several years to grow some deposit growth.

So it's more of a business banking or wholesale banking strategy versus a consumer strategy. But we have seen some consumer growth there. We also have been spending the last several -- 18 months in really improving the business process on how we underwrite small business and business banking loans. So we can better serve that customer more quickly in a technical fashion that reduces their need to give us a bunch of paper and wait four to eight weeks for a loan decision and while that loan is very important for the flexibility of that customer, we're also then able to say, listen, you need to bring your deposit relationship to us. At the same time, we can also cross-sell from the small business or business banking customer into their personal accounts, whether it's a mortgage home equity or their own personal operating account.

So that's an area that we feel that we have underserved our customer on and we believe that's something that we think will drive growth in future periods as we continue to roll that program out. We've seen very good deposit growth from our wholesale banking practice. I think a lot of that is due to our CNI focus over the many years and we're still seeing dividends and the ability to go upmarket and also drive deposit growth from our CNI customers. So that's where our biggest focus is on is CNI, looking at our commercial real estate book, understanding are there opportunities for us to win deposit business there as well as our de novo branches.

Collyn Gilbert -- KBW -- Analyst

Okay. Okay. That's helpful. And then, do you have any kind of definitive targets either near-term or long-term in terms of what you think you could get? The non-interest bearing deposit bucket to be as a percentage of overall deposits. I know that's kind of been gradually coming down. But where you would like to take that?

Eric R. Newell -- Chief Financial Officer

Well, I would -- right now, we're about 14%. So we've actually had -- that number has been fairly flat. But what's interesting throughout that, we've been growing our -- in the retail channel we've been growing our DTA for the last several years, it came in a little bit in 2018 but we've been growing that 10% year-over-year which we attribute to better execution and better compensation practices. Certainly, we'd love to get that ratio, that 14% ratio higher, we don't have a -- I don't want to put out a specific goal, but I feel that some of the work that I was talking -- some of the projects I've been talking about, particularly the CNI and the business banking or small business underwriting should assist us in driving that ratio to a more favorable level.

William H. W. Crawford -- Chief Executive Officer

Yeah, Collyn. It is Bill. As we slow asset -- we're slowing asset growth from where we've been historically and so that gives us a better opportunity to change the composition. When you look at our checking growth, it's sort of been aligned with what our earning asset growth looked like. And that's why we're still at 14%. But as we slow asset growth, we should start to see some more improvement in that number as we identify that as a key metric to getting our funding cost lower.

Collyn Gilbert -- KBW -- Analyst

Okay. That's helpful. And then just one final question just on the NIM. So your range is still -- your guidance range is still 280 to 285. What do you think would need to happen to get you to the high end of that range?

Eric R. Newell -- Chief Financial Officer

That curve would need to steepen.

Collyn Gilbert -- KBW -- Analyst

Okay, got it. I will leave it there. Thanks guys.

William H. W. Crawford -- Chief Executive Officer

Thanks, Collyn.

Operator

(Operator Instructions) Our next question comes from Mike Shay with Strategic Value Bank Partners. Please go ahead.

Michael Shay -- Strategic Value Bank Partners -- Analyst

Hi, good morning.

Eric R. Newell -- Chief Financial Officer

Good morning.

Michael Shay -- Strategic Value Bank Partners -- Analyst

So just one quick question on the non-interest income side. I know in the past you've kind of commented on wealth management and kind of how that factors into everything. I just wonder if you can maybe update how that kind of looked for the first quarter and then where you kind of tracked in on that front?

Eric R. Newell -- Chief Financial Officer

Certainly. I haven't provided specific numbers in terms of how it contributes to fee income. But we continue to be able to grow that business. And we've seen our assets under management which I'm not certain if we disclosed at this point. But we've seen that number grow fairly significantly. And what's really nice about this business is that, it's matured to the point where when we were initially growing it there was a lot of what we call breach payments to draw talent to us and kind of give them a guarantee for a little bit as they grow the business and the business has grown to the point where a lot of those bridges have burned off. So our bottom line revenue numbers are contributing more strongly in 2019 and expected to continue in the prior years. And also the shift from what used be very transaction based has moved to more of assets under management. So in the event that one of our wealth advisors decides to find seasonal opportunity elsewhere that fee income isn't going away from us right away, it will take some time.

But more importantly, in attracting new talent to join United Wealth Management, we don't need to offer those bridges to the extent that we had to before because the business that we can prove that our business work and is working and they don't need as much of a guarantee which helps reduce the expense side. Now, I would also say one of the things that has been a great success for us that we put in place over the last couple of years is what we call premier bankers, they are Series 6 folks that sit in many of our branches and they're able to talk not only about deposit products, but non deposit products. And we found that with those premier bankers sitting in a branch that the branch actually grow -- had better deposit growth and performance than those branches that do not and we feel that it's really driven by their ability to build a relationship with our customer or a new customer coming in, that's holistic approach and not just simply, hey we want only to put your opportunity funds into a CD, but maybe it makes sense for them to split some of that in a CD and put it in the wealth management product. I don't know if that helps, but I mean, that's more color versus specificity, but...

Michael Shay -- Strategic Value Bank Partners -- Analyst

Yeah. No, that's very helpful. I was kind of looking more on the color side for that. But kind of flipside for the specificity piece. I'm just kind of curious, I know you noted some of the seasonal weakness not interest on the commercial transaction accounts. Just maybe a bit of detail on how that timing tends to go and kind of what you're tracking for, say full year '19 non-interest deposit growth there?

Eric R. Newell -- Chief Financial Officer

So, you're -- I'm sorry, I didn't fully understand your question. You're asking about seasonality on non-interest deposits as it pertains to commercial?

Michael Shay -- Strategic Value Bank Partners -- Analyst

That's correct. I saw that was down.

Eric R. Newell -- Chief Financial Officer

Yeah. What we generally see in the first quarter is tax payments. So, a lot of that -- and a lot of the contractors that we have, they will spend it down their accounts and then it becomes a receivable and then later in the year, our contractors will get paid for the work that they've been doing. It's interesting, we've studied that it actually has a fairly notable impact on DDA balances in the first quarter. But you also have a lot of smaller customer -- business customers or wholesale banking customers that will have tax payments in their first quarter or they might pay bonuses to their staff in the first quarter. So that's the seasonality that we generally see in the first quarter.

Michael Shay -- Strategic Value Bank Partners -- Analyst

Okay. Got it. That's it for me. Thanks.

Operator

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

William H. W. Crawford -- Chief Executive Officer

Okay. Well, we appreciate your interest in United Bank and we appreciate to be on the call with us and hope everybody has a great day. Thank you.

Operator

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.

Duration: 40 minutes

Call participants:

Marliese L. Shaw -- Executive Vice President and Investor Relations Officer

William H. W. Crawford -- Chief Executive Officer

Eric R. Newell -- Chief Financial Officer

Mark Fitzgibbon -- Sandler O'Neill and Partners -- Analyst

Brody Preston -- Piper Jaffray -- Analyst

Collyn Gilbert -- KBW -- Analyst

Michael Shay -- Strategic Value Bank Partners -- Analyst

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