GLASTONBURY, Conn., Jan. 27, 2015 /PRNewswire/ -- United Financial Bancorp, Inc. ("United Financial" or the "Company") (NASDAQ Global Select Stock Market: UBNK), the holding company for United Bank (the "Bank"), today announced results for the quarter and year ended December 31, 2014. These results represent the second full fiscal quarter as the combined United Financial [merger of Rockville Financial, Inc. ("Rockville") and legacy United Financial Bancorp, Inc. ("legacy United")]. Rockville was the legal acquirer in the merger of equals with legacy United, in a transaction that closed on April 30, 2014, and Rockville changed its name to United Financial Bancorp, Inc. at that time.

United Financial Bancorp, Inc. (UBNK) logo

The Company had net income of $1.4 million, or $0.03 per diluted share, for the quarter ended December 31, 2014, compared to Rockville's net income of $1.8 million, or $0.07 per diluted share, for the quarter ended December 31, 2013. Operating net income for the fourth quarter of 2014 was $8.3 million (Non-GAAP), or $0.16 per diluted share, adjusted for $10.6 million (pre-tax) of expenses related to the merger, $3.4 million (pre-tax) net positive impact of the amortization and accretion of the purchase accounting adjustments (or fair value adjustments) as a result of the merger, $2.6 million (pre-tax) net adjustment for the Company's announced branch optimization program and $59,000 (pre-tax) net loss on sales of securities.




For the Three Months Ended


For the Years Ended

(In thousands, except share data)

December 31,


September 30,


December 31,


December 31,


December 31,




2014


2014


2013


2014


2013













Net income


$             1,421


$             9,985


$             1,757


$             6,782


$           14,227













Operating net income

8,316


10,450


3,296


26,729


16,300













GAAP EPS - Diluted

$0.03


$0.19


$0.07


$0.16


$0.54













Operating EPS - Diluted

$0.16


$0.20


$0.13


$0.62


$0.62

 

Operating net income for the quarter ended September 30, 2014 was $10.4 million (Non-GAAP), or $0.20 per diluted share, adjusted for $4.5 million (pre-tax) of expenses related to the merger, $3.8 million (pre-tax) net positive impact of the amortization and accretion of the purchase accounting adjustments (or fair value adjustments) as a result of the merger, and $430,000 (pre-tax) net gains on sales of securities. Operating net income for the prior year period was $3.3 million (Non-GAAP), or $0.13 per diluted share, adjusted for $2.1 million (pre-tax) of expenses related to the merger.

Net income for the year ended December 31, 2014 was $6.8 million, or $0.16 per diluted share, and declined from $14.2 million or $0.54 per diluted share for the year ended December 31, 2013.  Operating net income of $26.7 million (Non-GAAP), or $0.62 per diluted share for the year ended December 31, 2014 increased from $16.3 million or $0.62 per diluted share for the year ended December 31, 2013.  Adjustments to operating net income from GAAP net income are largely related to the merger with legacy United and are itemized in the reconciliation of non-GAAP measures.

"As we close the books on 2014, I am pleased to announce that we reported impressive organic loan growth, successfully completed the conversion to one core operating system, and have materially achieved the Company's objectives related to eliminating redundant expenses by the end of the fourth quarter," stated William H. W. Crawford, IV, Chief Executive Officer of United Financial Bancorp, Inc. and United Bank. "Looking forward to 2015, the operational environment will be challenging; however, I am confident that our strategy to reduce expenses and improve efficiency will enhance long term shareholder value, while maintaining superior service for our customers."

Earnings in both 2014 and 2013 were affected by non-operating income and expense. A reconciliation of these non-GAAP measures may be found on pages F-8 and F-9.

Financial Highlights

  • Fourth quarter net income of $1.4 million, or $0.03 per diluted share, operating net income of $8.3 million, or $0.16 per diluted share
  • Year-to-date 2014 net income of $6.8 million, or $0.16 per diluted share, operating net income of $26.7 million, or $0.62 per diluted share
  • 3.44% GAAP tax equivalent net interest margin, compared to 3.56% in the linked quarter. On an operating basis, the fourth quarter tax equivalent net interest margin was 3.15%, compared to 3.23% in the linked quarter.
  • Operating Return on Tangible Common Equity was 6.96%

Loan Production Highlights

  • 11% annualized linked quarter organic loan growth
  • $106 million of loan growth from the linked quarter
  • 3% linked quarter organic commercial loan growth (11% annualized)
  • Record residential mortgage originations at $122 million in the fourth quarter of 2014
  • 61% of residential mortgage volume is for home purchases

GAAP Results

The Company reported net income of $1.4 million, or $0.03 per diluted share, in the fourth quarter of 2014. The quarter's results reflect charges related to the Company's previously announced restructuring initiatives aimed at reducing redundant positions and eliminating non-strategic branches to better posture the Company to achieve greater operational efficiencies going forward. The completion of the core data processor conversion in the fourth quarter of 2014 allowed the Company to eliminate redundant back office positions and consultancy required to maintain the two legacy banks' processing systems. As a result, merger and acquisition expenses totaling $10.1 million in the fourth quarter of 2014 included payments to former employees due to position eliminations, payments to consultants and advisors in order to execute the transaction and to assist in the data processing conversion, as well as other integration related expenses.

Interest income totaled $48.2 million in the fourth quarter of 2014, an increase of $1.0 million, or 2%, from the linked quarter due to organic earning asset growth across loan portfolios as well as the investment portfolio. Earning assets increased by $165 million, or 3%, organically during the quarter, while average interest-earning assets increased by $151 million, or 3% from the linked quarter. Interest income and expense results include the recognition of purchase accounting adjustments made during the fourth quarter of 2014, for which more details are provided subsequently in this release. Interest expense increased by $1.3 million, or 26%, to $6.3 million for the fourth quarter of 2014.  The increase was primarily driven by the $75 million subordinated debt issuance that occurred on September 24, 2014, which had limited effect on the Company's third quarter 2014 interest expense but included $1.1 million of expense in the fourth quarter. Average interest bearing liabilities increased by $175 million, or 5%, from the linked quarter.

The GAAP tax equivalent net interest margin for the fourth quarter of 2014 compressed by 12 basis points to 3.44% compared to 3.56% for the linked quarter, primarily as a result of the impact of the interest expense associated with the subordinated debt issuance and to a lesser extent by the diminished impact of purchase accounting adjustments on the loan yields. On a GAAP basis, the yield on interest-earning assets declined by 3 basis points in the fourth quarter of 2014 to 3.94%, while the cost of interest-bearing liabilities increased by 11 basis points during the quarter to 0.62%, which was attributable to the expense on the subordinated debt. The operating net interest margin, which excludes the impact of purchase accounting adjustments, decreased by 8 basis points to 3.15% in the fourth quarter of 2014 from 3.23% in the linked quarter due in large part from the expense related to the subordinated debt and somewhat by lower yields on loans originated during the fourth quarter.

The net benefit to interest income in the fourth quarter of 2014 from accretion of purchase accounting adjustments totaled $1.5 million, an 11% decrease from $1.7 million recognized in the third quarter of 2014. The decline between the two quarters reflects the decreased impact of loan purchase accounting marks that is expected as the purchased portfolio continues to amortize. Interest expense benefited from net accretion of discounts totaling $1.9 million in the fourth quarter of 2014, a 10% decrease from $2.1 million recognized in the linked quarter. The decrease in the interest expense benefit was due to a notably lower level of maturities related to term wholesale funding in the fourth quarter of 2014 as compared to the linked quarter. The Company continues to expect future benefits to net interest income.

Total non-interest income declined $1.1, million, or 26%, to $3.0 million for the quarter ended December 31, 2014 from $4.1 million recognized in the linked quarter. The fourth quarter results include the recognition of a $2.1 million loss related to limited partnership investments, similarly reported in the linked quarter, this was largely attributable to a tax credit investment the Company entered into in the third quarter of 2014. During the third quarter of 2014, the Company completed a tax credit investment in which expense was recognized relating to the amortization of the underlying asset, while concurrently realizing an offsetting credit benefit of $2.6 million reflected in the tax provision for the third quarter. That tax benefit is duplicated in the fourth quarter of 2014. 

Significantly impacting non-interest income during the fourth quarter of 2014 was the $1.4 million reduction in other income (loss) compared to the linked quarter which largely attributable to the branch optimization program, whereby the Company recognized a $670,000 loss in the fourth quarter of 2014 representing the write-down of fixed assets. Additionally, the Company's mortgage servicing rights valuation reflected a reduction in value of $487,000 during the fourth quarter of 2014, a $421,000 unfavorable change from the linked quarter. The decline in market interest rates throughout 2014 had the effect of reducing fee income by $1.1 million year-to-date through reduction in mortgage servicing rights valuation adjustments, largely due to the Company's assumptions pertaining to the average life of the servicing asset at lower interest rates. While the Company produced record residential mortgage origination volume in the fourth quarter and for the full year of 2014 of $122 million and $378 million, respectively, gains on sales of loans were flat to the linked quarter and declined by $1.9 million to $3.1 million for the year ended December 31, 2014. Recognition of gains on sales of loans reflects the recognition of income at the time that secondary market contracts are executed rather than at the time those loans are delivered to the investor. Also noteworthy in the fourth quarter is the Company's recognition of $1.1 million of gross fee income associated with loan level hedging activity that occurred during the quarter, reflecting an increase of $989,000 over the linked quarter.

Non-interest expense for the quarter ended December 31, 2014 totaled $45.1 million and increased by $10.2 million, or 29%, from the quarter ended September 30, 2014. The linked quarter increase in non-interest expense is primarily driven by the $6.1 million increase in expenses directly related to the merger; by the $2.4 million increase in occupancy expense, of which $1.9 million is attributed to the announced closure of underutilized branches; and by the $1.1 million increase in marketing and promotion expense attributed to the introduction of the Company's new branding and marketing initiatives. These non-interest expense increases were partially offset by the $1.0 million decrease in salaries and employee benefits expense and $712,000 decrease in service bureau fees.

Operating Results

Operating net income declined by $2.1 million to $8.3 million, or $0.16 per diluted share, in the fourth quarter of 2014 from $10.4 million, or $0.20 per diluted share, in the linked quarter. The decline in operating net income is primarily attributable to a $1.7 million increase in the provision for loan losses and a $2.1 million increase in operating expense, partially offset by a $1.5 million increase in the tax benefit for operating results. The Company's total operating revenue was relatively flat and increased by $190,000 in comparison to the linked quarter comprised of a $106,000 increase in operating net interest income and an $84,000 increase in operating non-interest income. The slight increase in operating net interest income reflects the increase in interest income attributable to the growth in the loan and investment portfolios, partially offset by the increase in operating interest expense associated with a full quarter impact from the Company's $75 million subordinated debt issuance in September 2014. The Company reported operating return on average assets ("ROA") of 0.62% and operating return on tangible common equity ("ROTCE") of 6.96% for the fourth quarter of 2014, decreased from 0.80% and 7.93% in the linked quarter, respectively.

Noteworthy is the increase in fee income derived from United Northeast Financial Advisory ("United Northeast"), the Company's financial advisory business, which increased by $810,000 to $1.8 million for the year 2014. Specifically, Sorrento Pacific Financial, a research and consulting firm from Pennsylvania, ranks United Northeast Financial Advisory number three in their top ten list of high performing bank wealth management programs. The report cites United Northeast's year-over-year increase of 135% in fee income generated in the first half of 2014.

The provision for loan losses increased by $1.7 million to $4.3 million for the quarter ended December 31, 2014 compared to $2.6 million for the quarter ended September 30, 2014. A post-merger objective was to conduct and complete a comprehensive review of the purchased loan portfolio by year-end and ensure a consistent application of risk ratings across the portfolio. We have completed that exercise and believe asset quality for the Company remains strong and stable. As a result, net charge-offs for the fourth quarter of 2014 were $1.8 million, or 0.19% annualized as a percentage of average loans outstanding, and increased by $157,000 from $1.7 million, or 0.18% annualized as a percentage of average loans outstanding, in the linked quarter. Net charge-offs for the year-to-date 2014 were 0.12% as a percentage of average loans outstanding. Factors that continue to be considered in the provision for loan losses include the composition of the portfolio, the level of non-performing loans and charge-offs, local economic and credit conditions, the direction of real estate values and delinquency trends.

On a linked quarter basis, operating expense increased by $2.1 million, or 7%, to $32.6 million in the fourth quarter of 2014. Of the $2.1 million increase, $1.1 million is attributable to higher marketing and promotion expense, $2.0 million to increased other expenses and $487,000 to increased occupancy and equipment expense. These expense increases were partially offset by the $1.0 million, or 5.8%, decline in salaries and benefits expense and the $712,000, or 23.6%, decline in service bureau fees. Marketing and promotion expense increased $1.1 million to $1.4 million in the fourth quarter and is due to the deployment of a new branding campaign which was launched subsequent to the completion of the fourth quarter data conversion. Other expenses increased by $2.0 million to $6.0 million in the fourth quarter, largely due to a $771,000 increase in an off-balance sheet provision, to $191,000 in the fourth quarter of 2014 from a benefit of $580,000 in the linked quarter. The decline in salaries and benefits expense and the decline in service bureau fees are reflective of the Company eliminating redundant expenses associated with operating two core data processing systems from the legacy banks. The Company expects a normalized level of service bureau fees will begin in the first quarter of 2015.

Business Line Discussions

Commercial Banking

Total commercial loans grew organically during the fourth quarter of 2014 by $65 million, or 11% annualized. For the quarter ended December 31, 2014, commercial loan growth was comprised of a commercial real estate portfolio increase of $19 million, or 1%, and an increase in the commercial construction portfolio of $51 million, or 42%, partially offset by a decrease in the commercial business portfolio of $5 million, or 1%.

The Company recently announced the acquisition and expansion of our commercial loan teams in our Greater Springfield and Worcester markets. The commercial banking team acquired in Greater Springfield is led by Daniel Flynn, Executive Vice President and Chief Operating Officer for Wholesale Banking, a seasoned commercial banker with over three decades of experience in the Western Massachusetts market. The Worcester commercial banking team is led by Tom McGregor, SVP & Regional Commercial Banking Executive bringing over twenty years of commercial banking experience, focusing on commercial and asset based lending. These two leaders, with their respective teams, will augment the strong commercial banking focus at United and will not only allow the Company better access to commercial opportunities in their respective geographies, but will also service and seek to expand our existing relationships.

Mortgage Banking

The Company reported record quarterly origination volume for residential mortgage loans in the fourth quarter of 2014. During the quarter, mortgage originations increased by $62 million to $122 million from $60 million in the same period of the prior year. On a linked quarter basis, residential mortgage originations increased by $6 million from $116 million in the third quarter of 2014. Purchase mortgage activity increased during this time period to $74 million, or 61%, of production in the fourth quarter of 2014 compared to $37 million, or 62%, in the prior year period. On-balance sheet, residential mortgage loans grew by $52 million (15% annualized) during the fourth quarter of 2014 compared to the linked quarter. The Company continues to take market-share throughout its footprint and in 2014 was reported as the number one purchase lender in Hartford County and number one lender overall in Tolland County. Additionally, according to the Mortgage Bankers Association, home lending fell by 36% in 2014 while United Financial grew by 35% during that same period.

Funding & Deposits

Deposits totaled $4.04 billion at December 31, 2014 and were flat to the linked quarter with a slight increase of $6 million from $4.03 billion at September 30, 2014, reflecting a $58 million, or 9%, decrease in non-interest-bearing deposits and a $64 million, or 2%, increase in interest-bearing deposits. The cost of total interest bearing deposits increased by 2 basis points to 0.50% in the quarter ended December 31, 2014 from 0.48% in the linked quarter, driven primarily by the impact of certificate of deposit specials utilized in the fourth quarter of 2014.

At the end of the third quarter of 2014, the Company issued $75 million of ten-year term subordinated debt with a coupon rate of 5.75%. The impact of the issuance on the cost of interest-bearing funding in the fourth quarter 2014 results drove the majority of the 11 basis point increase in the cost of total interest bearing liabilities as compared to the linked quarter.

Investment Portfolio

The available for sale securities portfolio increased by $40 million during the quarter to $1.05 billion at December 31, 2014 from $1.01 billion at September 30, 2014. This increase is largely reflective of increased investments in cash flowing mortgage backed securities. These bond purchases represent an opportunity to shorten the investment portfolio duration and add diversification to the portfolio holdings. The available for sale securities portfolio represented 19% of total assets at December 31, 2014, unchanged from the prior quarter.

Asset Quality

The Company maintains a disciplined approach to asset quality and will not match extremely favorable pricing or underwriting and structure pressures of competitor banks if those considerations do not meet the Company's asset quality and return standards. The asset quality metrics as of December 31, 2014 reflect the combined loan portfolios following the merger, as well as the purchase accounting marks at legal close. Non-performing assets increased $2.7 million to $34.6 million at December 31, 2014 from $31.9 million at September 30, 2014. The ratio of non-performing assets to total assets increased 3 basis points to 0.63% at December 31, 2014 from 0.60% at September 30, 2014. Non-performing loans increased $3.1 million to $32.4 million at December 31, 2014 from $29.3 million at September, 2014. Included in non-performing loans are non-accruing troubled debt restructurings (TDR). Non-accruing TDRs decreased $1.4 million to $3.8 million at December 31, 2014 from $5.2 million at September 30, 2014. The ratio of non-performing loans to total loans increased 6 basis points to 0.83% at December 31, 2014 from 0.77% at September 30, 2014. At December 31, 2014, the allowance for loan losses as a percentage of non-performing loans and of total loans outstanding was 76.67% and 0.64%, respectively, compared to 76.15% and 0.59% at September 30, 2014, respectively. The allowance for loan losses as a percentage of total covered loans outstanding was 1.11% at December 31, 2014, compared to 1.06% at September 30, 2014.

Dividend

The Board of Directors declared a cash dividend on the Company's common stock of $0.10 per share to shareholders of record at the close of business on February 6, 2015 and payable on February 17, 2015. This dividend equates to a 2.89% annualized yield based on the $13.84 average closing price of the Company's common stock in the fourth quarter of 2014. The Company has paid dividends for 35 consecutive quarters.

Tangible Book Value

Tangible book value per share decreased to $9.65 at December 31, 2014 from $10.02 at September 30, 2014; primarily due to the impact of the Company's stock repurchase activity in the fourth, quarter and the cash dividend payment to shareholders totaling $0.10 per share, offset in part by the after-tax GAAP net income of $1.4 million. Tangible book value was also negatively impacted during the fourth quarter 2014 by the $10.1 million (pre-tax) of merger related expenses. As stated earlier, the Company expects to recognize limited merger and acquisition expense in 2015, thus significantly reducing further negative impact to tangible book value.

Stock Repurchase Program

The Company obtained approval and initiated a third buyback plan on October 15, 2014. Under this plan, the Company is authorized to repurchase up to 2,566,283 shares, or 5% of the outstanding shares at the time the plan was approved. As of December 31, 2014, the Company had repurchased 1,934,189 shares under this plan at an average cost of $14.02 per share, and has authorization to purchase an additional 632,094 shares. The Company repurchased 3,202,429 shares during the quarter ended December 31, 2014, at an average price of $13.71 as compared to the average closing price during the period of $13.84. In total, the Company has repurchased 7,615,465 shares as of December 31, 2014, or 26% of total shares outstanding prior to the first repurchase program.

Management Comments

"United Financial Bancorp, Inc. significantly returned capital to its shareholders in the fourth quarter of 2014 by buying back 6% of its shares outstanding as well as issuing its quarterly dividend payment. Our total shareholder return since the closing date of the merger is 12% compared to the SNL thrift index of 7% and our total shareholder return since the date of the Company's mutual conversion is 51% compared to the SNL thrift index of 41%," stated William H. W. Crawford, IV, Chief Executive Officer of United Financial Bancorp, Inc. and United Bank. "We look forward to becoming a highly efficient and top performing Company, to continuing to provide exceptional service to our customers and communities, to rewarding the performance of our hard working employees and to providing strong returns to our shareholders. I would like to thank our team of dedicated employees who continue to win new business and deliver a superior customer experience every day."

Investor Conference Call

United Financial Bancorp, Inc. will host a conference call on Wednesday, January 28, 2015 at 10:00 a.m. Eastern Time (ET) to discuss the Company's fourth quarter results. Those wishing to participate in the call may dial toll-free 1-888-339-0797. A telephone replay of the call will be available through February 8, 2015 by calling 1-877-344-7529 and entering conference number 10058633. A podcast will be available on the Company's website for an extended period of time, as well as on the Company's investor relations app.

About United Financial Bancorp, Inc.

United Financial Bancorp, Inc. is the holding company for United Bank, a full service financial services firm offering a complete line of commercial, business, and consumer banking products and services to customers throughout Central and Southern Connecticut, and Western and Central Massachusetts. On April 30, 2014, United Bank and Rockville Bank completed a transformational merger of equals bringing together two financially strong, well-respected institutions and creating a leading New England bank with more than 50 branches in two states and $5 billion in assets. Through the merger, Rockville Financial, Inc. completed the acquisition of United Financial Bancorp, Inc. The combined Company, known as United Financial Bancorp, Inc. trades on the NASDAQ Global Select Stock Exchange under the ticker symbol "UBNK".

For more information about United Bank's services and products call (866) 959-BANK or visit www.bankatunited.com. For more information about United Financial Bancorp, Inc., visit www.unitedfinancialinc.com or download the Company's free Investor Relations app on your Apple or Android device.

To download United Financial Bancorp, Inc.'s investor relations app on your iPhone or on your iPad, which offers access to SEC documents, press releases, videos, audiocasts and more, please visit: https://itunes.apple.com/WebObjects/MZStore.woa/wa/viewSoftware?id=725271098&mt=8 or https://play.google.com/store/apps/details?id=com.theirapp.ubnk for your Android mobile device.

Forward Looking Statements

This press release may contain certain forward-looking statements about the Company. Forward-looking statements include statements regarding anticipated future events and can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as "believe," "expect," "anticipate," "estimate," and "intend" or future or conditional verbs such as "will," "would," "should," "could," or "may." 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 include increased competitive pressures, changes in the interest rate environment, general economic conditions or conditions within the securities markets, and legislative and regulatory changes that could adversely affect the business in which the Company and its subsidiaries are engaged.

United Financial Bancorp, Inc. and Subsidiaries

Consolidated Statements of Net Income

(In Thousands, Except Share Data)

(Unaudited)










For the Three Months Ended


For the Year Ended

December 31,


December 31,


2014


2013


2014


2013

Interest and dividend income:








  Loans

$       40,682


$       16,898


$     133,011


$       67,752

  Securities-taxable interest

5,303


1,995


16,367


6,687

  Securities-non-taxable interest

1,794


763


5,113


2,748

  Securities-dividends

409


72


1,302


250

  Interest-bearing deposits

21


20


86


80

     Total interest and dividend income

48,209


19,748


155,879


77,517

Interest expense:








  Deposits

4,265


2,130


13,559


7,992

  Borrowed funds

2,052


642


4,448


2,468

     Total interest expense

6,317


2,772


18,007


10,460

     Net interest income

41,892


16,976


137,872


67,057

Provision for loan losses

4,333


720


9,496


2,046

  Net interest income after provision








     for loan losses

37,559


16,256


128,376


65,011

Non-interest income:








  Service charges and fees

4,511


1,810


14,473


7,935

  Net gain (loss) from sales of securities

(59)


-


1,228


585

  Net gain from sales of loans

741


257


3,148


5,054

  Bank-owned life insurance

897


514


3,042


2,092

  Net loss on limited partnership investments

(2,048)


-


(4,224)


-

  Other income (loss)

(1,041)


378


(1,062)


1,385

     Total non-interest income

3,001


2,959


16,605


17,051

Non-interest expense:








  Salaries and employee benefits

16,758


9,680


59,332


36,428

  Service bureau fees

2,304


663


8,179


3,287

  Occupancy and equipment

5,653


1,519


13,239


6,679

  Professional fees

1,297


429


3,662


2,377

  Marketing and promotions

1,420


42


2,296


476

  FDIC insurance assessments

818


301


2,553


1,172

  Other real estate owned

223


241


792


874

  Core deposit intangible amortization

481


-


1,283


-

  Merger related expense

10,136


2,141


36,918


2,141

  Other

5,986


2,159


16,178


9,032

     Total non-interest expense

45,076


17,175


144,432


62,466

Income (loss) before income taxes

(4,516)


2,040


549


19,596

Provision (benefit) for income taxes

(5,937)


283


(6,233)


5,369

Net income

$         1,421


$         1,757


$         6,782


$       14,227

















Net income per share:








    Basic

$0.03


$0.07


$0.16


$0.55

    Diluted

$0.03


$0.07


$0.16


$0.54









Weighted-average shares outstanding:








    Basic

50,329,002


25,444,330


42,829,094


26,061,942

    Diluted

51,086,811


25,872,666


43,269,517


26,426,220

















F-1

 

United Financial Bancorp, Inc. and Subsidiaries

Consolidated Statements of Operations

(In Thousands)

(Unaudited)












For the Three Months Ended


December 31,


September 30,


June 30,


March 31,


December 31,


2014


2014


2014


2014


2013

Interest and dividend income:










  Loans

$               40,682


$               40,119


$               35,366


$               16,844


$               16,898

  Securities-taxable interest

5,303


5,180


3,981


1,903


1,995

  Securities-non-taxable interest

1,794


1,495


1,053


771


763

  Securities-dividends

409


381


339


173


72

  Interest-bearing deposits

21


26


28


11


20

     Total interest and dividend income

48,209


47,201


40,767


19,702


19,748

Interest expense:










  Deposits

4,265


3,990


3,146


2,158


2,130

  Borrowed funds

2,052


1,018


742


636


642

     Total interest expense

6,317


5,008


3,888


2,794


2,772

     Net interest income

41,892


42,193


36,879


16,908


16,976

Provision for loan losses

4,333


2,633


2,080


450


720

  Net interest income after provision










     for loan losses

37,559


39,560


34,799


16,458


16,256

Non-interest income:










  Service charges and fees

4,511


3,944


3,892


2,126


1,810

  Net gain (loss) from sales of securities

(59)


430


589


268


-

  Net gain from sales of loans

741


667


1,284


456


257

  Bank-owned life insurance

897


873


750


522


514

  Net loss on limited partnership investments

(2,048)


(2,176)


-


-


-

  Other income (loss)

(1,041)


338


(196)


(163)


378

     Total non-interest income

3,001


4,076


6,319


3,209


2,959

Non-interest expense:










  Salaries and employee benefits

16,758


17,791


14,541


10,242


9,680

  Service bureau fees

2,304


3,016


1,768


1,091


663

  Occupancy and equipment

5,653


3,278


2,610


1,698


1,519

  Professional fees

1,297


1,081


856


428


429

  Marketing and promotions

1,420


367


280


229


42

  FDIC insurance assessments

818


785


632


318


301

  Other real estate owned

223


136


125


308


241

  Core deposit intangible amortization

481


481


321


-


-

  Merger related expense

10,136


4,008


20,945


1,829


2,141

  Other

5,986


3,979


4,099


2,114


2,159

     Total non-interest expense

45,076


34,922


46,177


18,257


17,175

Income (loss) before income taxes

(4,516)


8,714


(5,059)


1,410


2,040

Provision (benefit) for income taxes

(5,937)


(1,271)


512


463


283

Net income (loss)

$                 1,421


$                 9,985


$                (5,571)


$                    947


$                 1,757



F-2

 

United Financial Bancorp, Inc. and Subsidiaries

Consolidated Statements of Condition

(In Thousands)

(Unaudited)




























December 31,


September 30,


June 30,


March 31,


December 31,

ASSETS


2014


2014


2014


2014


2013

Cash and cash equivalents:











Cash and due from banks

$           43,416


$           58,109


$           66,269


$           19,977


$           20,308


Short-term investments

43,536


26,876


23,157


12,669


24,927



Total cash and cash equivalents

86,952


84,985


89,426


32,646


45,235

Available for sale securities - At fair value

1,053,011


1,012,780


952,033


442,332


404,903

Held to maturity securities - At amortized cost

15,368


15,556


15,761


14,749


13,830

Loans held for sale

8,220


6,332


19,656


3,267


422

Loans receivable, net of allowance for loan losses

3,877,063


3,772,522


3,674,936


1,739,952


1,697,012

Federal Home Loan Bank of Boston stock, at cost

31,950


30,090


30,419


15,053


15,053

Accrued interest receivable

14,212


14,712


13,728


5,923


5,706

Deferred tax asset, net

33,833


25,974


22,656


9,977


10,697

Premises and equipment, net

57,665


57,595


52,149


25,413


24,690

Goodwill


115,240


114,160


114,936


1,070


1,070

Core deposit intangible asset

9,302


9,783


10,264


-


-

Cash surrender value of bank-owned life insurance

122,622


121,724


120,851


64,992


64,470

Other real estate owned

2,239


2,647


3,213


2,657


1,529

Other assets

49,132


44,946


39,450


14,517


16,998




$      5,476,809


$      5,313,806


$      5,159,478


$      2,372,548


$      2,301,615

LIABILITIES AND STOCKHOLDERS' EQUITY






















Liabilities:











Deposits:











    Non-interest-bearing

$         602,359


$         659,859


$         649,929


$         275,068


$         266,609

    Interest-bearing

3,432,952


3,369,143


3,290,261


1,533,385


1,468,596


Total deposits

4,035,311


4,029,002


3,940,190


1,808,453


1,735,205

Mortgagors' and investor escrow accounts

13,004


6,649


11,983


3,868


6,342

Federal Home Loan Bank advances and other borrowings

777,314


594,873


526,375


245,560


240,228

Accrued expenses and other liabilities

48,772


31,916


28,287


14,320


20,458



Total liabilities

4,874,401


4,662,440


4,506,835


2,072,201


2,002,233

Total stockholders' equity

602,408


651,366


652,643


300,347


299,382




$      5,476,809


$      5,313,806


$      5,159,478


$      2,372,548


$      2,301,615



F-3

 


United Financial Bancorp, Inc. and Subsidiaries

Selected Financial Highlights 

(Dollars In Thousands, Except Share Data)

(Unaudited)












At or For the Three Months Ended


December 31,


September 30,


June 30,


March 31,


December 31,


2014


2014


2014


2014


2013

Share Data:










Basic net income (loss) per share 

$                   0.03


$                   0.19


$                 (0.13)


$                   0.04


$                   0.07

Diluted net income (loss) per share 

0.03


0.19


(0.13)


0.04


0.07

Dividends declared per share

0.10


0.10


0.10


0.10


0.10











Operating Data:










Total revenue

$               44,893


$               46,269


$               43,198


$               20,117


$               19,935

Total non-interest expense

45,076


34,922


46,177


18,257


17,175

Average earning assets 

4,969,225


4,817,907


3,892,382


2,190,391


2,126,987











Key Ratios:










Return (loss) on average assets (annualized)

0.11%


0.76%


-0.53%


0.16%


0.31%

Return (loss) on average equity (annualized)

0.90%


6.12%


-4.19%


1.26%


2.39%

Tax-equivalent net interest margin (annualized)

3.44%


3.56%


3.86%


3.17%


3.23%











Residential Mortgage Production:










Dollar volume (total)

$             121,886


$             115,787


$               82,434


$               58,141


$               59,687

Mortgages originated for home purchases

74,171


80,709


64,273


38,474


37,046

Loans sold

39,489


55,806


23,485


17,923


22,493

Net gains from sales of loans

741


667


1,284


456


257











Non-performing Assets:










Residential real estate

$               12,387


$               11,468


$                 8,366


$                 8,373


$                 8,887

Commercial real estate

10,663


5,914


168


-


656

Construction

611


638


665


673


1,518

Commercial business

4,872


5,703


5,516


1,148


1,259

Installment and collateral

25


386


18


6


3

Non-accrual loans

28,558


24,109


14,733


10,200


12,323

Troubled debt restructures - non-accruing

3,800


5,180


4,380


1,784


1,331

Total non-performing loans

32,358


29,289


19,113


11,984


13,654

Other real estate owned

2,239


2,647


3,213


2,657


1,529

Total non-performing assets

$               34,597


$               31,936


$               22,326


$               14,641


$               15,183











Non-performing loans to total loans

0.83%


0.77%


0.52%


0.68%


0.80%

Non-performing assets to total assets

0.63%


0.60%


0.43%


0.62%


0.66%

Allowance for loan losses to non-performing loans

76.67%


76.15%


111.67%


162.72%


140.50%

Allowance for loan losses to total loans

0.64%


0.59%


0.58%


1.11%


1.12%











Non-GAAP Ratios:  (1)










Non-interest expense to average assets

3.35%


2.66%


4.41%


3.16%


3.06%

Efficiency ratio (2)

96.03%


72.09%


106.89%


90.76%


86.15%

Cost of interest-bearing deposits (annualized)

0.50%


0.46%


0.46%


0.58%


0.59%

Revenue growth rate

-2.97%


7.11%


114.73%


0.91%


-9.28%

Revenue growth rate (annualized)

-11.90%


28.44%


n/m

(3)

3.65%


-37.10%

Average earning asset growth rate 

3.14%


23.78%


77.70%


2.98%


3.53%

Average earning asset growth rate (annualized)

12.56%


95.11%


n/m

(3)

11.92%


14.14%































(1)  Non-GAAP Ratios are not financial measurements required by generally accepted accounting principles; however, management believes such information is useful to

       investors in evaluating Company performance.













(2)  The efficiency ratio represents the ratio of non-interest expenses to the sum of net interest income before provision for loan losses and non-interest income, exclusive of  

       net loss on limited partnership investments.












(3)  The annualized growth rate for revenue and earning assets based on second quarter 2014 results is not meaningful due to the acquisition of United Financial Bancorp, Inc.

       on April 30, 2014.













F- 4

 

United Financial Bancorp, Inc. and Subsidiaries

Average Balance Sheets, Interest and Yields/Costs

(Dollars In Thousands)

(Unaudited)


 For the Three Months Ended 



December 31, 2014


December 31, 2013




Interest 





Interest 



Average


and



Average


and


Interest-earning assets:

Balance


Dividends

Yield/Cost


Balance


Dividends

Yield/Cost

Residential real estate

$   1,403,045


$    12,296

3.51

%

$       630,228


$      5,706

3.62

Commercial real estate

1,665,230


19,538

4.65


761,970


8,450

4.40

Construction

162,823


2,406

5.86


52,459


497

3.76

Commercial business

618,429


6,380

4.09


233,491


2,214

3.76

Installment and collateral

8,483


62

2.94


2,315


31

5.38

Investment securities

1,048,052


8,385

3.20


399,033


3,075

3.08

Federal Home Loan Bank stock

30,110


113

1.49


15,053


14

0.37

Other earning assets 

33,053


21

0.25


32,438


20

0.25

Total interest-earning assets 

4,969,225


49,201

3.94


2,126,987


20,007

3.75











Allowance for loan losses

(23,353)





(18,930)




Non-interest-earning assets 

434,559





140,383




Total assets 

$   5,380,431





$    2,248,440














Interest-bearing liabilities:










NOW and money market

$   1,309,691


1,024

0.31


$       659,882


547

0.33

Savings

549,209


100

0.07


224,098


37

0.07

Certificates of deposit 

1,545,452


3,141

0.81


559,951


1,546

1.10

Total interest-bearing deposits 

3,404,352


4,265

0.50


1,443,931


2,130

0.59

Federal Home Loan Bank advances

469,194


589

0.50


181,117


609

1.33

Other borrowings

205,057


1,463

2.85


30,366


33

0.43

Total interest-bearing liabilities 

4,078,603


6,317

0.62


1,655,414


2,772

0.66











Non-interest-bearing deposits

616,618





265,736




Other liabilities

53,786





33,267




Total liabilities 

4,749,007





1,954,417




Stockholders' equity

631,424





294,023




Total liabilities and stockholders' equity

$   5,380,431





$    2,248,440














Net interest-earning assets

$      890,622





$       471,573




Tax-equivalent net interest income 



42,884





17,235


Tax-equivalent net interest rate spread 




3.32





3.09

Tax-equivalent net interest margin 




3.44





3.23











Average interest-earning assets to average










   interest-bearing liabilities 




121.84





128.49











Less tax-equivalent adjustment



992





259


Net interest income



$    41,892





$    16,976
































F- 5

 

United Financial Bancorp, Inc. and Subsidiaries

Average Balance Sheets, Interest and Yields/Costs

(Dollars In Thousands)

(Unaudited)


For the Three Months Ended 




December 31, 2014


September 30, 2014





Interest 





Interest 




Average


and



Average


and



Interest-earning assets:

Balance


Dividends

Yield/Cost


Balance


Dividends

Yield/Cost


Residential real estate

$     1,403,045


$    12,296

3.51

%

$   1,364,982


$    11,776

3.45

%

Commercial real estate

1,665,230


19,538

4.65


1,632,233


18,549

4.51


Construction

162,823


2,406

5.86


123,848


2,851

9.13


Commercial business

618,429


6,380

4.09


610,574


6,787

4.41


Installment and collateral

8,483


62

2.94


17,146


156

3.64


Investment securities

1,048,052


8,385

3.20


987,362


7,809

3.16


Federal Home Loan Bank stock

30,110


113

1.49


30,197


115

1.51


Other earning assets 

33,053


21

0.25


51,565


26

0.20


Total interest-earning assets 

4,969,225


49,201

3.94


4,817,907


48,069

3.97













Allowance for loan losses

(23,353)





(22,152)





Non-interest-earning assets 

434,559





446,626





Total assets 

$     5,380,431





$   5,242,381
















Interest-bearing liabilities:











NOW and money market

$     1,309,691


1,024

0.31


$   1,366,795


945

0.28


Savings

549,209


100

0.07


438,607


167

0.15


Certificates of deposit 

1,545,452


3,141

0.81


1,532,862


2,878

0.75


Total interest-bearing deposits 

3,404,352


4,265

0.50


3,338,264


3,990

0.48


Federal Home Loan Bank advances

469,194


589

0.50


400,220


584

0.58


Other borrowings

205,057


1,463

2.85


165,557


434

1.05


Total interest-bearing liabilities 

4,078,603


6,317

0.62


3,904,041


5,008

0.51













Non-interest-bearing deposits 

616,618





632,425





Other liabilities

53,786





53,011





Total liabilities 

4,749,007





4,589,477





Stockholders' equity

631,424





652,904





Total liabilities and stockholders' equity

$     5,380,431





$   5,242,381
















Net interest-earning assets

$        890,622





$      913,866





Tax-equivalent net interest income 



42,884





43,061



Tax-equivalent net interest rate spread 




3.32





3.46


Tax-equivalent net interest margin 




3.44





3.56













Average interest-earning assets to average interest-bearing liabilities 



121.84





123.41













Less tax-equivalent adjustment



992





868



Net interest income



$    41,892





$    42,193




































F- 6


 

United Financial Bancorp, Inc. and Subsidiaries

Average Balance Sheets, Interest and Yields/Costs

(Dollars In Thousands)

(Unaudited)



For the Year Ended December 31,


2014



2013


Average
 Balance


Interest and Dividends


Yield/Cost


Average
 Balance


Interest and Dividends


Yield/Cost

Interest-earning assets:














Residential real estate

$        1,134,890


$    39,537


3.48

%


$           652,220


$    24,646


3.78

%

Commercial real estate

1,365,059


65,044


4.76



724,089


33,337


4.60


Construction

106,291


7,469


7.03



48,531


1,773


3.65


Commercial business

492,035


20,549


4.18



197,499


7,867


3.98


Installment and collateral

10,147


412


4.06



2,581


129


5.01


Investment securities

809,305


25,203


3.11



348,627


10,619


3.05


Federal Home Loan Bank stock

24,097


404


1.68



15,222


59


0.39


Other earning assets

35,842


86


0.24



30,143


80


0.27


Total interest-earning assets

3,977,666


158,704


3.99



2,018,912


78,510


3.89
















Allowance for loan losses

(21,192)







(18,664)






Non-interest-earning assets

329,652







133,409






  Total assets

$        4,286,126







$        2,133,657




















Interest-bearing liabilities:














NOW and money market

$        1,109,625


3,293


0.30



$           596,580


1,772


0.30


Savings

418,091


437


0.10



225,379


142


0.06


Certificates of deposit

1,218,782


9,829


0.81



541,148


6,078


1.12


Total interest-bearing deposits

2,746,498


13,559


0.49



1,363,107


7,992


0.59


Federal Home Loan Bank advances

344,218


2,326


0.68



179,637


2,387


1.33


Other borrowings

127,381


2,122


1.67



17,842


81


0.45


Total interest-bearing liabilities

3,218,097


18,007


0.56



1,560,586


10,460


0.67
















Non-interest-bearing deposits

503,398







238,803






Other liabilities

34,482







29,681






Total liabilities 

3,755,977







1,829,070






Stockholders' equity

530,149







304,587






Total liabilities and stockholders' equity

$        4,286,126







$        2,133,657




















Net interest-earning assets

$           759,569







$           458,326






Tax-equivalent net interest income 



140,697







68,050




Tax-equivalent net interest rate spread 





3.43







3.22


Tax-equivalent net interest margin 





3.54







3.37
















Average interest-earning assets to average interest-bearing liabilities 





123.60







129.37
















Less tax-equivalent adjustment



2,825







993




Net interest income



$  137,872







$    67,057







F-7

 

United Financial Bancorp, Inc. and Subsidiaries

Reconciliation of Non-GAAP Financial Measures

(Dollars In Thousands)

(Unaudited)




































Three Months Ended


Years Ended




December 31,


September 30,


June 30,


March 31,


December 31,


December 31,


December 31,




2014


2014


2014


2014


2013


2014


2013

















Net income (loss)


$            1,421


$             9,985


$            (5,571)


$                947


$              1,757


$            6,782


$          14,227

Adjustments:
















Net interest income


(3,421)


(3,828)


(4,948)


-


-


(12,197)


-


Non-interest income


729


(430)


(589)


(268)


-


(558)


(585)


Non-interest expense


12,513


4,497


21,266


1,829


2,141


40,105


3,511


Income tax expense (benefit)


(2,926)


226


(4,346)


(357)


(602)


(7,403)


(853)


Net adjustment


6,895


465


11,383


1,204


1,539


19,947


2,073

Total operating net income


$            8,316


$           10,450


$             5,812


$             2,151


$              3,296


$          26,729


$          16,300

















Total net interest income


$          41,892


$           42,193


$           36,879


$           16,908


$            16,976


$        137,872


$          67,057

Adjustments:
















Impact from purchase accounting fair value marks:
















(Accretion) / Amortization of loan mark


(1,543)


(1,734)


(3,388)


-


-


(6,665)


-


Accretion / (Amortization) of deposit mark


1,276


1,482


1,150


-


-


3,908


-


Accretion / (Amortization) of borrowings mark


602


612


410


-


-


1,624


-


Net adjustment


(3,421)


(3,828)


(4,948)


-


-


(12,197)


-

Total operating net interest income


$          38,471


$           38,365


$           31,931


$           16,908


$            16,976


$        125,675


$          67,057

















Total non-interest income


$            3,001


$             4,076


$             6,319


$             3,209


$              2,959


$          16,605


$          17,051

Adjustments:
















Net (gain) loss on sales of securities


59


(430)


(589)


(268)


-


(1,228)


(585)


Loss on fixed assets - branch optimization


670


-


-


-


-


670


-


Net adjustment


729


(430)


(589)


(268)


-


(558)


(585)

Total operating non-interest income


3,730


3,646


5,730


2,941


2,959


16,047


16,466

Total operating net interest income


38,471


38,365


31,931


16,908


16,976


125,675


67,057

Total operating revenue


$          42,201


$           42,011


$           37,661


$           19,849


$            19,935


$        141,722


$          83,523

































Total non-interest expense


$          45,076


$           34,922


$           46,177


$           18,257


$            17,175


$        144,432


$          62,466

Adjustments:
















Merger and acquisition expense


(10,136)


(4,008)


(20,945)


(1,829)


(2,141)


(36,918)


(2,141)


Core deposit intangible amortization expense


(481)


(481)


(321)


-


-


(1,283)


-


Effect of position eliminations


-


-


-


-


-


-


(561)


Effect of branch lease termination agreements


(1,888)


-


-


-


-


(1,888)


(809)


Amortization of fixed asset fair value mark


(8)


(8)


-


-


-


(16)


-


Net adjustment


(12,513)


(4,497)


(21,266)


(1,829)


(2,141)


(40,105)


(3,511)

Total operating expense


$          32,563


$           30,425


$           24,911


$           16,428


$            15,034


$        104,327


$          58,955


















































Total loans


$     3,897,866


$      3,791,491


$      3,693,115


$      1,756,611


$       1,713,792


$     3,897,866


$     1,713,792


Non-covered loans (1)


(1,658,594)


(1,693,669)


(1,820,526)


-


-


(1,655,102)


-


Total covered loans


$     2,239,272


$      2,097,822


$      1,872,589


$      1,756,611


$       1,713,792


$     2,242,764


$     1,713,792


Allowance for loan losses


24,809


22,304


$           21,343


$           19,500


$            19,183


24,809


$          19,183


Allowance for loan losses to total loans


0.64%


0.59%


0.58%


1.11%


1.12%


0.64%


1.12%


Allowance for loan losses to total covered loans


1.11%


1.06%


1.14%


1.11%


1.12%


1.11%


1.12%

















(1)  As required by GAAP, the Company recorded at fair value the loans acquired in the legacy United transactions. These loans carry no allowance for loan losses




for the periods reflected above.
























































F-8

 

United Financial Bancorp, Inc. and Subsidiaries

Selected Interest Income/Expense and Yields/Costs

Reconciliation of Non-GAAP Financial Measures

(Dollars In Thousands)

(Unaudited)



































Three Months Ended December 31, 2014






















GAAP


Mark to Market


Operating






Interest 




Interest 




Interest 








and




and




and








Dividends


Yield/Cost


Dividends


Yield/Cost


Dividends


Yield/Cost




Residential real estate


$    12,296


3.51

%

$       (633)


(0.21)

%

$    12,929


3.72

%



Commercial real estate


19,538


4.65


744


0.21


18,794


4.44




Construction


2,406


5.86


774


2.03


1,632


3.83




Commercial business


6,380


4.09


685


0.51


5,695


3.58




Installment and collateral


62


2.94


(27)


(1.81)


89


4.75




















Certificates of deposit 


3,141


0.81


(1,276)


(0.33)


4,417


1.14




Federal Home Loan Bank advances


589


0.50


(609)


(0.53)


1,198


1.03




Other borrowings


1,463


2.85


7


(0.14)


1,456


2.99




















Tax-equivalent net interest margin 


42,884


3.44


3,421




39,463


3.15






















































Three Months Ended September 30, 2014






















GAAP


Mark to Market


Operating






Interest 




Interest 




Interest 








and




and




and








Dividends


Yield/Cost


Dividends


Yield/Cost


Dividends


Yield/Cost




Residential real estate


$    11,776


3.45

%

$       (794)


(0.27)

%

$    12,570


3.72

%



Commercial real estate


18,549


4.51


248


0.10


18,301


4.41




Construction


2,851


9.13


1,348


4.59


1,503


4.54




Commercial business


6,787


4.41


1,003


0.73


5,784


3.68




Installment and collateral


156


3.64


(71)


(2.00)


227


5.64




















Certificates of deposit 


2,878


0.75


(1,482)


(0.38)


4,360


1.13




Federal Home Loan Bank advances


584


0.58


(620)


(0.63)


1,204


1.21




Other borrowings


434


1.05


8


0.04


426


1.01




















Tax-equivalent net interest margin 


43,061


3.56


3,828




39,233


3.23




















































F-9



 

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SOURCE United Financial Bancorp, Inc.

Copyright 2015 PR Newswire

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