United Financial Bancorp Reports Third Quarter 2013 Results

WEST SPRINGFIELD, Mass., Oct. 17, 2013 /PRNewswire/ -- United Financial Bancorp, Inc. (the "Company") (NASDAQ Global Select Market: UBNK), the holding company for United Bank (the "Bank"), reported net income of $4.6 million, or $0.23 per diluted share, for the third quarter of 2013 compared to net income of $2.9 million, or $0.20 per diluted share, for the corresponding period in 2012. Excluding acquisition-related expenses of $366,000 ($254,000 net of tax benefit) resulting from the Company's acquisition of New England Bancshares, Inc. and impairment charges on securities of $202,000 ($119,000 net of tax benefit), net income would have been $3.3 million, or $0.22 per diluted share, for the third quarter of 2012.

For the nine months ended September 30, 2013, net income was $13.4 million, or $0.67 per diluted share, compared to net income of $8.4 million, or $0.56 per diluted share, for the same period in 2012.  Excluding branch closing costs totaling $987,000 ($584,000 net of tax benefit), acquisition-related expenses of $281,000 ($270,000 net of tax benefit), a $206,000 gain related to an investment in a venture capital fund accounted for on a cash basis ($122,000 net of tax expense), and a net loss of $50,000 on sales of investment securities ($30,000 net of tax benefit),  net income would have been $14.2 million, or $0.71 per diluted share, for the nine months ended September 30, 2013. Excluding acquisition-related expenses of $958,000 ($818,000 net of tax benefit) and impairment charges on securities of $202,000 ($119,000 net of tax benefit), net income would have been $9.3 million, or $0.63 per diluted share, for the first nine months of 2012.

The Company also announced a quarterly cash dividend of $0.11 per share, payable on November 29, 2013 to shareholders of record as of November 7, 2013. Based upon the closing share price of $16.43 as of October 16, 2013 and the annualized dividend of $0.44, the dividend yield on the Company's common stock is 2.68%.

Financial Highlights:

• Total loans increased by $77.4 million, or 4%, to $1.89 billion at September 30, 2013 from $1.82 billion at December 31, 2012, primarily due to growth of $57.6 million, or 7%, in commercial mortgages, $17.8 million, or 4%, in residential mortgages and $7.0 million, or 13%, in construction loans.
• Credit quality remained strong, as demonstrated by the non-performing loans to total loans ratio of 65 basis points at September 30, 2013 and an annualized net charge-offs to average loans ratio of 10 basis points for the nine months ended September 30, 2013.
• Core deposits increased by $70.1 million, or 6%, to $1.21 billion at September 30, 2013 from $1.14 billion at December 31, 2012. 
• Tangible book value per share was $13.09 at September 30, 2013.  During the nine months of 2013, the Company repurchased 489,351 shares of its common stock at an average price of $14.88 per share. At September 30, 2013, the Company had approximately 1.2 million shares authorized for future repurchases under current plans.   

"We are pleased with our improved performance this quarter. Asset quality remained strong and compares favorably to industry averages and those of our peers. Our balance sheet remains very healthy with solid capital and liquidity positions," commented Richard B. Collins, President and Chief Executive Officer.  "Our performance reflects solid loan and deposit growth. As we approach the one year mark of our acquisition of New England Bank, our brand is gaining momentum in the Connecticut region and customers are responding to our unique approach to banking. In all regions, we are focused on growing our franchise and maximizing relationships with existing customers."

Earnings Summary

• Net interest income increased $5.8 million, or 43%, to $19.3 million for the third quarter of 2013 as a result of an increase in average interest-earning assets partially offset by a reduction in the net interest margin.  Total average interest-earning assets increased $729.0 million, or 47%, to $2.27 billion for the third quarter of 2013 driven by the acquisition of New England Bank in the fourth quarter of 2012 and solid organic loan growth. The net interest margin declined 11 basis points to 3.40% for the three months ended September 30, 2013 compared to the same period last year reflecting a decrease in spreads in response to the challenging interest rate environment.
• Non-interest income increased by $465,000, or 19%, to $3.0 million for the three months ended September 30, 2013 due to growth in other income, deposit services charges and bank-owned life insurance income. Other income increased by $237,000, or 74%, reflecting higher loan prepayment penalties and increased credit enhancement fees related to residential loans sold to the Federal Home Loan Bank of Boston. Fee income on depositors' accounts increased $181,000, or 12%, driven by a larger deposit base related to the New England Bank acquisition, offset to a large extent by the negative impact of new regulations, including the Durbin Amendment, on debit card fee income. Bank-owned life insurance income increased $70,000, or 16%, primarily attributable to the acquisition of the New England Bank portfolio, partially offset by a decrease in the yield on the portfolio assets.
• Non-interest expense increased $3.6 million, or 33%, to $14.8 million in the third quarter of 2013.  Excluding acquisition-related expenses totaling $366,000 for the third quarter of 2012, non-interest expense would have increased by $4.0 million, or 37%, as compared to the same period one year ago primarily reflecting costs to operate, expand and promote our new Connecticut franchise, expenses related to a new branch established in Northborough, Massachusetts during the fourth quarter of 2012, annual wage increases and higher expenses related to loan workout and collection activities.
• Income taxesincreased $824,000, or 93%, to $1.7 million for the three months ended September 30, 2013 primarily due to an increase in pre-tax income.  

BalanceSheet Activity:

• Total assets increased $88.4 million, or 4%, to $2.49 billion at September 30, 2013 from $2.40 billion at December 31, 2012 reflecting growth in loans and cash balances offset in part by a decrease in the investment securities portfolio.
• Total loans increased $77.4 million, or 4%, to $1.89 billion at September 30, 2013 due to growth in commercial mortgages ($57.6 million), residential mortgages ($17.8 million) and construction loans ($7.0 million) as a result of successful business development efforts and competitive products and pricing.  These items were partially reduced by modest runoff in the consumer and commercial segments.
• Cash and cash equivalents increased $28.3 million, or 92%, to $59.0 million at September 30, 2013 due to a temporary increase in interest-earning balances held at the Federal Reserve Bank of Boston.
• Total investment securities decreased $14.9 million, or 4%, to $362.4 million at September 30, 2013 as a portion of cash flows from existing bonds were used to fund loan originations.
• Total deposits increased $98.2 million, or 5%, to $1.95 billion at September 30, 2013 reflecting growth of $70.1 million, or 6%, in core account balances and an increase of $28.1 million, or 4%, in certificates of deposit.  The growth in core deposit account balances was driven by sales and marketing initiatives, competitive products and pricing, and a focus on providing excellent customer service. Core deposit balances were $1.21 billion, or 62% of total deposits, at September 30, 2013 compared to $1.14 billion, or 62%, at December 31, 2012.
• Short-term borrowings decreased $18.8 million, or 24%, to $60.4 million at September 30, 2013 and long term-debt increased by $19.7 million, or 15%, to $153.7 million at September 30, 2013 as the Bank elected to extend the term of certain short-term FHLB advances.

Credit Quality:

• Non-performing assets totaled $14.6 million, or 0.59% of total assets, at September 30, 2013 compared to $17.3 million, or 0.72% of total assets, at December 31, 2012.  The $2.7 million decrease in non-performing assets reflects sales of OREO properties and successful loan workout activities.
• The ratio of the allowance for loan losses to total loans was 0.72% at September 30, 2013 as compared to 0.67% at December 31, 2012.  Excluding the aggregate impact of acquired loans totaling $549.5 million at September 30, 2013 and $664.6 million at December 31, 2012, the ratio of the allowance for loan losses to total loans would have been 1.02% at September 30, 2013 and 1.05% at December 31, 2012.  Net charge-offs totaled $1.4 million or 0.10% of average loans outstanding for the nine months ended September 30, 2013 as compared to net charge-offs of $1.1 million or 0.11% of average loans outstanding for the same period in 2012.    

Capital and Liquidity:

• At September 30, 2013, the Company remained well capitalized with atangible equity-to-tangible assets ratioof 10.53% and an equity-to-assets ratio of 12.16%.
• At September 30, 2013, the Company continued to have considerable liquidity consisting of significant balances at the Federal Reserve Bank of Boston, a large amount of marketable loans and investment securities, substantial unused borrowing capacity at the Federal Home Loan Bank of Boston and the Federal Reserve Bank of Boston and access to funding through the repurchase agreement and brokered deposit markets.

United Financial Bancorp, Inc. is a publicly owned corporation and the holding company for United Bank, a federally chartered bank headquartered at 95 Elm Street, West Springfield, MA, 01090.  The Company's common stock is traded on the NASDAQ Global Select Market under the symbol UBNK.   The Company had total consolidated assets of approximately $2.49 billion as of September 30, 2013. United Bank provides an array of financial products and services through its 16 branch offices and two express drive-up branches in the Springfield region of Western Massachusetts; seven branches in the Worcester region of Central Massachusetts; and 12 branches in Connecticut'sHartford, Tolland and New Haven counties.  The Bank also operates loan production offices located in Beverly, Massachusetts and Glastonbury, Connecticut. Through its Wealth Management Group, the Bank offers access to a wide range of investment and insurance products and services, as well as financial, estate and retirement strategies and products.  For more information regarding the Bank's products and services and for United Financial Bancorp, Inc. investor relations information please visit www.bankatunited.com or on Facebook at facebook.com/bankatunited.

Except for the historical information contained in this press release, the matters discussed may be deemed to be forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties, including changes in economic conditions in the Company's market area, changes in policies by regulatory agencies, fluctuations in interest rates, demand for loans in the Company's market area, competition, and other risks detailed from time to time in the Company's SEC reports.  Actual strategies and results in future periods may differ materially from those currently expected.   These forward-looking statements represent the Company's judgment as of the date of this release.  The Company disclaims, however, any intent or obligation to update these forward-looking statements.

CONFERENCE CALL:

United Financial Bancorp, Inc. will host a conference call at 10:00 a.m. Eastern time on Friday, October 18, 2013 to discuss the results for the quarter.  Participants should dial-in to the call a few minutes before it begins. 

Audio:

Dial in number: 1-888-317-6016

Replay:

Dial in number: 1-877-344-7529

Conference number: 10034398

A telephone replay of the call will be available one hour after the end of the conference call through November 18, 2013 at 9:00 a.m. EDT.