News Column

United Financial Bancorp, Inc. Announces Second Quarter Results

July 23, 2014

GLASTONBURY, Conn., July 23, 2014 (GLOBE NEWSWIRE) -- United Financial Bancorp, Inc. ("United Financial" or the "Company") (Nasdaq:UBNK), the holding company for United Bank (the "Bank"), today announced results for the quarter ended June 30, 2014. These results include one month of the pre-merger Rockville Financial, Inc. ("Rockville") net income and net income of the combined entity beginning on May 1, 2014. Rockville was the legal acquirer in the merger of equals with legacy United Financial Bancorp, Inc. ("legacy United"), in a transaction that closed on April 30, 2014, and Rockville changed its name to United Financial Bancorp, Inc. at that time.

The Company had a net loss of $5.6 million, or $(0.13) per diluted share, for the quarter ended June 30, 2014, compared to Rockville's net income of $3.3 million, or $0.12 per diluted share, for the quarter ended June 30, 2013. Operating net income for the second quarter of 2014 was $5.8 million (Non-GAAP), or $0.13 per diluted share, adjusted for $21.3 million (pre-tax) of expenses related to the merger, $4.9 million (pre-tax) net impact of the amortization and accretion of the purchase accounting adjustments (or fair value adjustments) as a result of the merger, and $589,000 (pre-tax) net gains on sales of securities.

 For the Three Months Ended
(In thousands, except share data)June 30,March 31,June 30,
 201420142013
       
Net income  $ (5,571)  $ 947  $ 3,299
       
Operating net income 5,812 2,151 4,019
       
GAAP EPS - Diluted ($0.13)$0.04$0.12
       
Operating EPS - Diluted$0.13$0.08$0.15


Operating net income for the quarter ending March 31, 2014 was $2.2 million (Non-GAAP), or $0.08 per diluted share, adjusted for $1.8 million (pre-tax) of expenses related to the merger of equals between Rockville Financial, Inc. and United Financial Bancorp, Inc., as well as income of $268,000 (pre-tax) from net gains on sales of securities.

Operating net income for the second quarter of 2013 was $4.0 million (Non-GAAP), or $0.15 per diluted share, adjusted for $809,000 (pre-tax) for the impact of a branch lease termination agreement and $561,000 (pre-tax) for termination expense related to position eliminations, as well as income of $329,000 (pre-tax) from net gains on sales of securities.

"During the second quarter, Rockville Financial, Inc. and United Financial Bancorp, Inc. successfully completed their merger of equals. Organic earning asset growth and operating earnings results for the quarter were strong, despite including only two months as a combined organization," stated William H. W. Crawford, IV, Chief Executive Officer of United Financial Bancorp, Inc. and United Bank. "The team is intensely focused on integrating the two companies and is on target to complete the data conversion in the fourth quarter of 2014."

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 the last two tables.

Financial Highlights

Second quarter diluted loss per share of $(0.13), operating diluted earnings per share of $0.13Second quarter net loss of $5.6 million, operating net income of $5.8 million90% increase in operating revenue, compared to linked quarter52% increase in operating expense, compared to linked quarter$1.3 million net gain from sales of loans, compared to $456,000 in the linked quarter3.88% GAAP tax equivalent net interest margin impacted by the merger, compared to 3.17% in the linked quarter. On an operating basis, the second quarter tax equivalent net interest margin was 3.36%Reduction in ratio of NPAs to Total Assets to 0.44% from 0.62% due to the mergerOperating Non-Interest Expense/Average Assets decreased to 2.38% from 2.84% in the linked quarter

Loan Production Highlights

8% annualized linked quarter organic loan growth, based on $3.7 billion post-merger gross loans$73 million of organic loan growth in the linked quarter2% linked quarter organic commercial loan growth (9% annualized), based on $2.3 billion post-merger total commercial loans78% of residential mortgage volume is for home purchases, almost double that of the prior year period

Capital Highlights

52% 3-year total shareholder return7% 1-year total shareholder return46% of the second stock buyback plan completed at $13.08 per share average cost, compared to $13.47 per share average closing price. Purchases were precluded from November 15, 2013 merger announcement until April 30, 2014 merger close $9.99 tangible book value per share, compared to $11.52 tangible book value per share in the linked quarter due to the impact of the merger

Merger Update

Merger completed as of legal close effective April 30, 2014Combined financial results beginning May 1, 2014Outside consultant is assisting with conversion integration; data conversion on schedule for fourth quarter of 2014Four branch closures are plannedRemain on track to achieve the 15% cost saves communicated at the time of announcementManagement intensely focused on merger integration and the Company still achieved strong organic growth in earning assets during the second quarter

GAAP Results

The Company reported a net loss of $5.6 million in the second quarter of 2014 primarily due to expenses associated with the merger of Rockville and legacy United. Merger and acquisition expenses totaled $20.9 million in the second quarter of 2014 and were comprised of payments to former executives under executed contracts; expenses associated with accelerated vesting of stock awards to executives, employees and board members of both legacy organizations; payments made to consultants and advisors in order to execute the transaction and to assist in the fourth quarter conversion to one core data processor; as well as other integration related expenses.

Interest income totaled $40.8 million in the second quarter of 2014, an increase of $21.1 million from the linked quarter due to the addition of legacy United earning assets on May 1, 2014, which on average increased by $1.7 billion, or 77%, from the linked quarter. This includes the recognition of purchase accounting adjustments made during the second quarter, for which more details are provided further along in this release. Interest expense of $3.9 million for the second quarter of 2014 increased by $1.1 million from $2.8 million in the linked quarter. Average interest bearing liabilities increased by $1.4 billion, or 80%, from the linked quarter. The addition of the legacy United balance sheet was only reflected in 61 days of the 91 day quarter, which will normalize in the quarter ending September 30, 2014.

GAAP tax equivalent net interest margin for the second quarter of 2014 expanded by 71 basis points to 3.88%, compared to 3.17% for the first quarter of 2014, primarily as a result of purchase accounting adjustments in the second quarter of 2014 and the merging of the legacy United loan and investment portfolios as well as deposits and borrowings. The net benefit to interest income in the second quarter of 2014 from accretion of purchase accounting adjustments totaled $3.4 million. Interest expense benefited from net accretion of discounts totaling $1.6 million in the second quarter of 2014. On a GAAP basis, the yield on earning assets increased by 59 basis points in the second quarter of 2014 to 4.28%, while the cost of interest-bearing liabilities decreased by 15 basis points during the quarter to 0.50%. Operating net interest margin, which excludes the impact of purchase accounting adjustments, increased to 3.36% in the second quarter of 2014 from 3.17% in the linked quarter.

Total non-interest income increased by $3.1 million in the second quarter of 2014, or 97%, to $6.3 million from the linked quarter, reflective of higher service charges related to an increased level of deposits, an increase in net gains realized from the sale of investment securities, and an increase in net gains on sales of loans. Net gains on sales of loans increased to $1.3 million, or 182% in the quarter ending June 30, 2014 from $456 thousand in the linked quarter.

Total non-interest expense for the quarter ending June 30, 2014 totaled $46.2 million and increased by $27.9 million, or 153%, from the quarter ending March 31, 2014. The linked quarter increase in non-interest expense is primarily driven by expenses directly related to the merger, including $20.9 million of merger and acquisition expense and $321,000 of amortization of the resulting core deposit intangible. Salaries and benefits expense increased by $4.3 million, or 42%, to $14.5 million reflecting the addition of legacy United employees to the Company beginning May 1, 2014.

Operating "Core" Results

Operating net income increased by $3.7 million to $5.8 million, or $0.13 per diluted share, in the second quarter of 2014 from $2.2 million, or $0.08 per diluted share, in the linked quarter. These quarterly results reflect one month of financial performance for Rockville and two months of financial performance for the combined entity. The Company reported operating return on average assets ("ROA") of 0.56% and operating return on tangible common equity ("ROTCE") of 4.46% for the second quarter of 2014.

The Company's total operating revenue increased by $17.8 million, or 90%, in comparison to the linked quarter due to the acquisition of legacy United earning assets on May 1, 2014. Operating net interest income increased by $15.0 million, or 89%, in the second quarter of 2014 to $31.9 million. Operating loan interest and fee income increased by $15.0 million, or 89%, over the linked quarter. Investment income of $5.5 million increased by $2.7 million, or 93%, over the linked quarter primarily driven by the increase in the portfolio size of the merged companies as well as the post-merger growth in the investment portfolio during the second quarter of 2014. Operating non-interest income in comparison to the linked quarter increased by $2.8 million, or 95%, to $5.7 million due to higher deposit-associated fees as a result of the increased deposit base.

Operating revenue for the quarter additionally benefitted due to borrower facing loan level hedges. This program was implemented during the first half of 2013. In the second quarter of 2014, loan hedge income totaled $446,000, an increase of $351,000 over the linked quarter.

The provision for loan losses increased by $1.6 million to $2.1 million for the three months ended June 30, 2014 compared to $450,000 for the quarter ending March 31, 2014. On a linked quarter basis, the provision for loan losses increased partially as a result of the merger and also due to the continued expansion of the loan portfolio. Net charge-offs for the second quarter of 2014 were $237,000, or 0.03% annualized as a percentage of average loans outstanding, and increased by $104,000 from $133,000, or 0.03% annualized as a percentage of average loans outstanding, in the linked quarter. Factors 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 $8.5 million, or 52%, to $24.9 million in the second quarter of 2014, primarily as a result of the merger. Salaries and benefits increased $4.3 million, or 42%, to $14.5 million reflecting two months of salaries and benefits for the combined Company and one month for Rockville. Occupancy and equipment expense increased by $912,000 to $2.6 million in the second quarter of 2014. Rent and lease expenses from legacy United's facilities were the largest factor in the linked quarter change in occupancy and equipment expense, with a more modest increase driven by increased depreciation expense associated with a higher level of fixed assets. Other expenses totaled $4.1 million in the second quarter of 2014, representing an increase of $2.0 million, or 94%, which excludes the expenses associated with amortization of the Company's core deposit intangible. Substantial drivers to the $2.0 million increase in other operating expenses was the reserve for off-balance sheet exposures totaling $530,000, an increase in information technology costs totaling $319,000, and an increase in director fees totaling $139,000.

Business Line Discussions

Commercial Banking

Despite the Company's focus on the merger and subsequent integration, total commercial loans grew organically during the second quarter by $53 million, or 9% annualized on the larger post-merger balance of $2.3 billion as compared to the pre-merger total commercial loans of $1.1 billion at March 31, 2014. As of June 30, 2014, commercial loans were 64% of gross loans, and were comprised of commercial real estate loans totaling $1.6 billion, commercial business loans totaling $598 million, and commercial construction loans totaling $106 million. Average commercial loans totaled $1.9 billion, including two months of combined organization loan originations.

In addition to the merger, the growth in commercial banking relationships as well as the increase in municipal deposits is a result of sales efforts by the business development and cash management teams. Municipal deposits totaled $212 million at June 30, 2014, an increase of $38 million from the prior quarter-end.

Mortgage Banking

Residential mortgage loans grew on-balance sheet by $671 million on a linked quarter basis primarily due to the merger. Residential mortgage originations increased by $5 million, or 7% in the second quarter of 2014 to $82 million from $77 million in the same period of the prior year, despite the shift to a purchase mortgage market during that period. On a linked quarter basis, residential mortgage originations increased by $24 million, or 42%, from $58 million in the first quarter. Purchase mortgage activity increased significantly during this time period to $64 million, or 78%, of production in the second quarter of 2014 compared to $32 million, or 41%, in the prior year period. Purchase mortgage production increased by $26 million over the linked quarter.

The residential mortgage business line continues to achieve significant enhancements, including the expansion of commission-based mortgage loan officers to 34 at June 30, 2014 from 26 at March 31, 2014, and from 23 at year-end 2013. Despite adding over 20 mortgage loan officers over the past three quarters (an increase of 130%), due to improved efficiencies the Company has only increased its back-office lending support staff minimally. During the quarter, the Company announced the hiring of three high-performing West Springfield-based mortgage bankers who will help to enhance the Company's lending presence in Western Massachusetts. This Western Massachusetts expansion augments the prior quarter expansion of new mortgage loan officers in Fairfield County, Connecticut and in close proximity to Boston, Massachusetts. The strategy for loan officer expansion is driven by finding talent that will achieve a high level of service that our customers expect, as well as drive value through established relationships with purchase activity. Consequently, our geographic expansion is more about the talent acquisition and their corresponding location.

It is further noted that on a year-over-year basis, the Company's revenue attributable to secondary market activities represents a smaller percentage of the total operating revenue due to a shift in the pipeline composition and the contribution margin on portfolio loans representing a higher return than gains on loans sold in the secondary market for much of the second quarter of 2014. Interest rates in the second quarter of 2014 declined by 19 basis points when using the 10 year U.S. Treasuries as a proxy, which further reduced the value of the Company's mortgage servicing rights by $435,000 in the second quarter as compared to a $138,000 decrease in the first quarter of 2014. The Company recognized an increase in net gains on sales of loans on a linked quarter basis, resulting in net gains of $1.3 million on $23 million of residential mortgages sold to the secondary market in the second quarter of 2014 as compared to net gains of $456,000 on $18 million sold in the linked quarter. Local market competition and interest spread volatility continue to impact the dynamic strategy to operate under the secondary mortgage model or the portfolio based approach, which will in turn impact revenue levels derived from gains on sales of loans. Based on current market conditions the Company expects to continue to sell a portion of residential mortgage originations in the third quarter of 2014.

Retail Banking Update

Deposits totaled $3.98 billion at June 30, 2014 and increased by $2.17 billion from $1.81 billion at March 31, 2014, primarily due to the merger. The increase in the quarter consisted of a $375 million increase in non-interest bearing deposits and a $1.79 billion increase in interest bearing deposits. The Company's organic growth strategy will be further enhanced by the third quarter 2014 opening of a new branch inside the ShopRite Supermarket located in East Hartford, Connecticut which will provide extended hours and seven days per week banking; the early 2015 opening of a banking center location in North Haven, Connecticut; and the early 2015 expansion in its already significant presence in Glastonbury, Connecticut, by building a full-service banking branch at 2670 Main Street in Glastonbury.

The Company has announced that it identified four branches to consolidate to minimize branch overlap that would occur after the strategic merger of equals, and those closures are in process. These consolidations will help to make the combined bank stronger, more efficient and better able to serve the public in the bank's very competitive geographic markets.

Investment Portfolio

The available for sale securities portfolio increased $547 million to $952 million, representing 18% of total assets at June 30, 2014, from $405 million at year-end 2013. The increase is largely due to the merger, and additionally to bond purchases which represent an opportunity to shorten portfolio duration and add diversification to the portfolio holdings. The Company is comfortable with the level of investment securities as a percentage of total assets as of quarter-end, and will likely maintain the allocation level throughout 2014.

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 June 30, 2014 reflect the combined loan portfolios following the merger, as well as the purchase accounting marks at legal close. Non-performing assets increased $7.8 million to $22.4 million at June 30, 2014 from $14.6 million at March 31, 2014. The ratio of non-performing assets to total assets decreased 18 basis points to 0.44% at June 30, 2014 from 0.62% million at March 31, 2014. Non-performing loans increased $7.2 million to $19.2 million at June 30, 2014 from $12.0 million at March 31, 2014. Included in non-performing loans are non-accruing troubled debt restructurings (TDR). Non-accruing TDRs increased $2.6 million to $4.4 million at June 30, 2014 from $1.8 million at March 31, 2014. The ratio of non-performing loans to total loans decreased 16 basis points to 0.52% at June 30, 2014 from 0.68% at March 31, 2014. At June 30, 2014, the allowance for loan losses as a percentage of non-performing loans and of total loans outstanding was 110.97% and 0.58%, compared to 162.72% and 1.11% at March 31, 2014, respectively. The allowance for loan losses as a percentage of total originated loans outstanding was 1.14% at June 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 July 28, 2014 and payable on August 4, 2014. This dividend equates to a 2.97% annualized yield based on the $13.45 average closing price of the Company's common stock in the second quarter of 2014. The Company has paid dividends for 33 consecutive quarters.

Tangible Book Value

The Company issued common stock to legacy United shareholders totaling $351.5 million as well as additional consideration of $6.6 million to legacy United stock option holders, which was offset by the increase of goodwill during the June 30, 2014 quarter to $114.9 million from $1.1 million at March 31, 2014. Tangible book value decreased by $1.53 during the quarter to $9.99 at June 30, 2014 from $11.52 at March 31, 2014, primarily due to capital adjustments related to the merger and the after-tax impact on book value of one-time merger related expenses totaling $15.2 million. Tangible book value was further negatively impacted by the after-tax GAAP loss of $5.6 million, which includes the aforementioned after-tax impact of one-time merger costs as well as the cash dividend payment to shareholders totaling $0.10 per share.

Stock Repurchase Program

The Company obtained approval and initiated a second buyback plan on May 20, 2013. Under this plan, the Company is authorized to repurchase up to 2,730,026 shares, or 10% of the outstanding shares at the time the plan was approved. As of June 30, 2014, the Company had repurchased 1,246,086 shares under this plan at an average cost of $13.08 per share, and has authorization to purchase an additional 1,483,940 shares. The Company repurchased 89,195 shares during the quarter ended June 30, 2014, at an average price of $12.65. The average closing price during the second quarter was $13.45.

In total, the Company has repurchased 4,197,336 shares as of June 30, 2014, or 14% of total shares outstanding prior to the first repurchase program. Note that the Company was precluded from repurchasing shares during the time period from the merger announcement until after the merger closed.

Management Comments

"Rockville Financial, Inc. completed its merger with United Financial Bancorp, Inc. on April 30, 2014 and the team is diligently working on integration. We look forward to becoming a highly efficient and top performing Company, and continuing to provide exceptional service to our customers and communities," stated William H. W. Crawford, IV, Chief Executive Officer (CEO). "I would like to thank our team of dedicated employees who have been working tirelessly to integrate these two strong banks, while winning new business and continuing to deliver a superior customer experience every day."

Investor Conference Call

United Financial Bancorp, Inc. will host a conference call on Thursday, July 24, 2014 at 11:00 a.m. Eastern Time (ET) to discuss the Company's second 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 August 5, 2014 by calling 1-877-344-7529 and entering conference number 10049324. 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 legacy United Bank's services and products, call (866) 959-BANK and for information about legacy Rockville Bank's services and products, call (860) 291-3600 or visit www.thenewunitedbank.com for more information about both banks. 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 Operations
(In Thousands, Except Share Data)
(Unaudited)
         
 For the Three MonthsFor the Six Months 
 Ended June 30,Ended June 30,
 2014201320142013
Interest and dividend income:        
Loans  $ 35,237  $ 16,801  $ 52,081  $ 33,956
Securities-interest taxable  3,981 1,640  5,884  2,864
Securities-interest non-taxable  1,053 650  1,824  1,300
Securities-dividends  468 72  641  107
Interest-bearing deposits  28 21  39  42
Total interest and dividend income  40,767 19,184  60,469  38,269
Interest expense:        
Deposits  3,146 1,878  5,304  3,862
Borrowed funds  742 605  1,378  1,199
Total interest expense  3,888 2,483  6,682  5,061
Net interest income  36,879 16,701  53,787  33,208
Provision for loan losses  2,080 403  2,530  794
Net interest income after provision for loan losses  34,799 16,298  51,257  32,414
Non-interest income:        
Service charges and fees  3,892 2,005  6,018  3,554
Net gain from sales of securities  589 329  857  556
Net gain from sales of loans  1,284 1,001  1,740  3,061
Bank-owned life insurance  750 524  1,272  1,034
Other (loss) income  (196) 249  (359)  787
Total non-interest income  6,319 4,108  9,528  8,992
Non-interest expense:        
Salaries and employee benefits  14,541 9,112  24,783  17,786
Service bureau fees  1,768 921  2,859  1,736
Occupancy and equipment  2,610 2,210  4,308  3,646
Professional fees  856 617  1,284  1,340
Marketing and promotions  280 98  509  168
FDIC assessments  632 330  950  624
Other real estate owned  125 214  433  460
Core deposit intangible amortization  321  --  321  --
Merger related expense  20,945  --  22,774  --
Other  4,099 2,356  6,213  4,768
Total non-interest expense  46,177 15,858  64,434  30,528
(Loss) income before income taxes  (5,059) 4,548  (3,649)  10,878
Provision for income taxes  512 1,249  975  3,028
Net (loss) income  $ (5,571)  $ 3,299  $ (4,624)  $ 7,850
         
         
Net (loss) income per share:        
Basic ($0.13)$0.13 ($0.14)$0.29
Diluted ($0.13)$0.12 ($0.14)$0.29
         
Weighted-average shares outstanding:        
Basic 43,178,460 26,326,788 34,191,095 26,774,721
Diluted 43,178,460 26,677,589 34,191,095 27,115,459
         
         
United Financial Bancorp, Inc. and Subsidiaries
Consolidated Statements of Operations
(In Thousands)
(Unaudited)
           
 For the Three Months Ended
 June 30,March 31,December 31,September 30,June 30,
 20142014201320132013
Interest and dividend income:          
Loans  $ 35,237  $ 16,844  $ 16,898  $ 16,898  $ 16,801
Securities-interest taxable  3,981  1,903  1,995  1,828 1,640
Securities-interest non-taxable  1,053  771  763  685 650
Securities-dividends  468  173  72  71 72
Interest-bearing deposits  28  11  20  18 21
Total interest and dividend income  40,767  19,702  19,748  19,500 19,184
Interest expense:          
Deposits  3,146  2,158  2,130  2,000 1,878
Borrowed funds  742  636  642  627 605
Total interest expense  3,888  2,794  2,772  2,627 2,483
Net interest income  36,879  16,908  16,976  16,873 16,701
Provision for loan losses  2,080  450  720  532 403
Net interest income after provision for loan losses  34,799  16,458  16,256  16,341 16,298
Non-interest income:          
Service charges and fees  3,892  2,126  1,810  2,571 2,005
Net gain from sales of securities  589  268  --  29 329
Net gain from sales of loans  1,284  456  257  1,736 1,001
Bank-owned life insurance  750  522  514  544 524
Other (loss) income  (196)  (163)  378  220 249
Total non-interest income  6,319  3,209  2,959  5,100 4,108
Non-interest expense:          
Salaries and employee benefits  14,541  10,242  9,680  8,962 9,112
Service bureau fees  1,768  1,091  663  888 921
Occupancy and equipment  2,610  1,698  1,519  1,514 2,210
Professional fees  856  428  429  608 617
Marketing and promotions  280  229  42  266 98
FDIC assessments  632  318  301  247 330
Other real estate owned  125  308  241  173 214
Core deposit intangible amortization  321  --  --  --  --
Merger related expense  20,945  1,829  2,141  --  --
Other  4,099  2,114  2,159  2,105 2,356
Total non-interest expense  46,177  18,257  17,175  14,763 15,858
(Loss) income before income taxes  (5,059) 1,410  2,040  6,678 4,548
Provision for income taxes  512  463  283  2,058 1,249
Net (loss) income  $ (5,571)  $ 947  $ 1,757  $ 4,620  $ 3,299
           
           
United Financial Bancorp, Inc. and Subsidiaries
Consolidated Statements of Condition
(In Thousands)
(Unaudited)
           
 June 30,March 31,December 31,September 30,June 30,
ASSETS20142014201320132013
Cash and cash equivalents:          
Cash and due from banks  $ 66,269  $ 19,977  $ 20,308  $ 22,729  $ 29,937
Short-term investments  23,157  12,669 24,927 31,742 53,486
Total cash and cash equivalents  89,426  32,646 45,235 54,471 83,423
Available for sale securities - At fair value  952,033  442,332 404,903 370,127 350,571
Held to maturity securities - At amortized cost  15,761  14,749 13,830 14,141 4,555
Loans held for sale  19,656  3,267 422 2,904 3,691
Loans receivable, net of allowance for loan losses  3,674,936  1,739,952 1,697,012 1,637,325 1,599,537
Federal Home Loan Bank of Boston stock, at cost  30,419  15,053 15,053 15,053 15,053
Accrued interest receivable  13,728  5,923 5,706 5,879 6,032
Deferred tax asset, net  22,656  9,977 10,697 14,056 13,618
Premises and equipment, net  52,149  25,413 24,690 22,848 22,278
Goodwill and other intangible assets  129,796  5,154 5,173 4,779 4,406
Derivative assets  4,533  5,654 7,851 6,707 6,272
Cash surrender value of bank-owned life insurance  120,851  64,992 64,470 63,949 63,404
Other real estate owned  3,213  2,657 1,529 2,129 2,611
Other assets  30,321  4,779 5,044 4,712 7,687
   $ 5,159,478  $ 2,372,548  $ 2,301,615  $ 2,219,080  $ 2,183,138
LIABILITIES AND STOCKHOLDERS' EQUITY          
           
Liabilities:          
Deposits:          
Non-interest-bearing  $ 649,929  $ 275,068  $ 266,609  $ 259,773  $ 248,144
Interest-bearing  3,328,234  1,533,385 1,468,596 1,432,299 1,338,997
Total deposits  3,978,163  1,808,453 1,735,205 1,692,072 1,587,141
Mortgagors' and investor escrow accounts  11,983  3,868 6,342 3,635 7,030
Federal Home Loan Bank advances and other borrowings  483,466  245,560 240,228 196,246 272,070
Accrued expenses and other liabilities  33,223  14,320 20,458 31,954 19,905
Total liabilities  4,506,835  2,072,201 2,002,233 1,923,907 1,886,146
Total stockholders' equity  652,643  300,347 299,382 295,173 296,992
   $ 5,159,478  $ 2,372,548  $ 2,301,615  $ 2,219,080  $ 2,183,138
           
           
United Financial Bancorp, Inc. and Subsidiaries
Selected Financial Highlights 
(Dollars In Thousands, Except Share Data)
(Unaudited)
           
 At or For the Three Months Ended
 June 30,March 31,December 31,September 30,June 30,
 20142014201320132013
Share Data:          
Basic net (loss) income per share   $ (0.13)  $ 0.04  $ 0.07  $ 0.18  $ 0.13
Diluted net (loss) income per share  (0.13) 0.04 0.07 0.18 0.12
Dividends declared per share 0.10 0.10 0.10 0.10 0.10
           
Operating Data:          
Total revenue  $ 43,198  $ 20,117  $ 19,935  $ 21,973  $ 20,809
Total expense  46,177  18,257 17,175 14,763 15,858
Average earning assets   3,874,875  2,190,391 2,126,987 2,054,372 1,954,114
           
Key Ratios:          
Return (loss) on average assets (annualized)  (0.53)% 0.16% 0.31% 0.85% 0.64%
Return (loss) on average equity (annualized)  (4.19)% 1.26% 2.39% 6.28% 4.26%
Tax-equivalent net interest margin (annualized)  3.88% 3.17% 3.23% 3.32% 3.48%
           
Residential Mortgage Production:          
Dollar volume (Purchase & Refi)  $ 82,434  $ 58,141  $ 59,687  $ 69,890  $ 77,086
Mortgages originated for home purchases  64,273  38,474 37,046 39,934 31,221
Loans sold  23,485  17,923 22,493 68,446 66,098
Net gains from sales of loans  1,284  456 257 1,736 1,001
           
Non-performing Assets:          
Residential real estate  $ 8,487  $ 8,373  $ 8,887  $ 7,106  $ 7,521
Commercial real estate  168  --  656  1,086  1,126
Construction  665  673  1,518  1,442  1,456
Commercial business  5,516  1,148  1,259  799  773
Installment and collateral  18  6  3  3  --
Non-accrual loans  14,854  10,200 12,323 10,436 10,876
Troubled debt restructured - non-accruing  4,380  1,784 1,331 2,078 2,461
Total non-performing loans  19,234  11,984 13,654 12,514 13,337
Other real estate owned  3,213  2,657 1,529 2,129 2,611
Total non-performing assets  $ 22,447  $ 14,641  $ 15,183  $ 14,643  $ 15,948
           
Non-performing loans to total loans 0.52% 0.68% 0.80% 0.76% 0.83%
Non-performing assets to total assets 0.44% 0.62% 0.66% 0.66% 0.73%
Allowance for loan losses to non-performing loans 110.97% 162.72% 140.50% 149.45% 137.55%
Allowance for loan losses to total loans 0.58% 1.11% 1.12% 1.13% 1.14%
           
Non-GAAP Ratios: (1)          
Non-interest expense to average assets 4.41% 3.16% 3.06% 2.71% 3.07%
Efficiency ratio (2) 106.89% 90.76% 86.15% 67.18% 76.21%
Cost of interest-bearing deposits (annualized) 0.46% 0.58% 0.59% 0.57% 0.57%
Operating revenue growth rate 114.73% 0.91% -9.28% 5.59% -2.72%
Operating revenue growth rate (annualized) n/m(3) 3.65% -37.10% 22.37% -10.88%
Average earning asset growth rate  76.90% 2.98% 3.53% 5.13% 1.83%
Average earning asset growth rate (annualized) n/m(3) 11.92% 14.14% 20.52% 7.32%
           
(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. 
           
(3) The annualized growth rate for revenue and earning assets based on current quarter results is not meaningful due to the acquisition of United Financial Bancorp, Inc. on April 30, 2014.
 
           
United Financial Bancorp, Inc. and Subsidiaries
Average Balance Sheets, Interest and Yields/Costs
(Dollars In Thousands)
(Unaudited)
             
  For the Three Months Ended 
 June 30, 2014June 30, 2013
   Interest     Interest   
 Averageand  Averageand  
Interest-earning assets:BalanceDividendsYield/CostBalanceDividendsYield/Cost
Residential real estate  $ 1,109,696  $ 9,716 3.50%  $ 650,886  $ 6,203 3.81%
Commercial real estate  1,365,361  18,291 5.37  695,657  8,398 4.84
Construction  89,948  1,804 8.05  45,666  406 3.57
Commercial business  465,780  5,253 4.52  175,346  1,761 4.03
Installment and collateral  12,642  173 5.48  2,679  33 4.93
Investment securities  770,052  6,020 3.13  337,896  2,618 3.10
Federal Home Loan Bank stock  20,794  120 2.31  15,053  15 0.40
Other earning assets   40,602  27 0.27  30,931  21 0.27
Total interest-earning assets   3,874,875  41,404 4.28  1,954,114  19,455 3.99
             
Allowance for loan losses  (19,951)      (18,443)    
Non-interest-earning assets   329,452      128,364    
Total assets   $ 4,184,376      $ 2,064,035    
             
Interest-bearing liabilities:            
NOW and money market accounts   $ 1,090,279  772 0.28  $ 557,460  370 0.27
Savings accounts   457,373  134 0.12  232,073  36 0.06
Certificates of deposit   1,197,717  2,240 0.75  527,102  1,472 1.12
Total interest-bearing deposits   2,745,369  3,146 0.46  1,316,635  1,878 0.57
Advances from the Federal Home Loan Bank   310,946  569 0.73  173,077  591 1.37
Other borrowings  64,740  173 1.07  10,721  14 0.52
Total interest-bearing liabilities   3,121,055  3,888 0.50  1,500,433  2,483 0.66
             
Non-interest-bearing liabilities   531,722      253,738    
Total liabilities   3,652,777      1,754,171    
Stockholders' equity  531,599      309,864    
Total liabilities and stockholders' equity  $ 4,184,376      $ 2,064,035    
             
Net interest-earning assets  $ 753,820      $ 453,681    
Tax-equivalent net interest income     37,516      16,972  
Tax-equivalent net interest rate spread      3.78     3.33
Tax-equivalent net interest margin      3.88     3.48
             
Average interest-earning assets to average interest-bearing liabilities    124.15     130.24
             
Less tax-equivalent adjustment    637      271  
Net interest income    $ 36,879      $ 16,701  
             
             
United Financial Bancorp, Inc. and Subsidiaries
Average Balance Sheets, Interest and Yields/Costs
(Dollars In Thousands)
(Unaudited)
             
 For the Three Months Ended 
 June 30, 2014March 31, 2014
   Interest     Interest   
 Averageand  Averageand  
Interest-earning assets:BalanceDividendsYield/CostBalanceDividendsYield/Cost
Residential real estate  $ 1,109,696  $ 9,716 3.50%  $ 650,047  $ 5,887 3.62%
Commercial real estate  1,365,361  18,291 5.37  784,803  8,487 4.39
Construction  89,948  1,804 8.05  47,079  419 3.61
Commercial business  465,780  5,253 4.52  250,503  2,030 3.29
Installment and collateral  12,642  173 5.48  2,171  21 3.92
Investment securities  770,052  6,020 3.13  422,928  3,118 2.95
Federal Home Loan Bank stock  20,794  120 2.31  15,053  57 1.54
Other earning assets   40,602  27 0.27  17,807  11 0.25
Total interest-earning assets   3,874,875  41,404 4.28  2,190,391  20,030 3.69
             
Allowance for loan losses  (19,951)      (19,255)    
Non-interest-earning assets   329,452      143,107    
Total assets   $ 4,184,376      $ 2,314,243    
             
Interest-bearing liabilities:            
NOW and money market accounts   $ 1,090,279  772 0.28  $ 688,268  552 0.33
Savings accounts   457,373  134 0.12  223,369  35 0.06
Certificates of deposit   1,197,717  2,240 0.75  585,090  1,571 1.09
Total interest-bearing deposits   2,745,369  3,146 0.46  1,496,727  2,158 0.58
Advances from the Federal Home Loan Bank   310,946  569 0.73  192,859  584 1.23
Other borrowings  64,740  173 1.07  45,815  52 0.46
Total interest-bearing liabilities   3,121,055  3,888 0.50  1,735,401  2,794 0.65
             
Non-interest-bearing liabilities   531,722      279,167    
Total liabilities   3,652,777      2,014,568    
Stockholders' equity  531,599      299,675    
Total liabilities and stockholders' equity  $ 4,184,376      $ 2,314,243    
             
Net interest-earning assets  $ 753,820      $ 454,990    
Tax-equivalent net interest income     37,516      17,236  
Tax-equivalent net interest rate spread      3.78     3.04
Tax-equivalent net interest margin      3.88     3.17
             
Average interest-earning assets to average interest-bearing liabilities    124.15     126.22
             
Less tax-equivalent adjustment    637      328  
Net interest income    $ 36,879      $ 16,908  
             
             
United Financial Bancorp, Inc. and Subsidiaries
Average Balance Sheets, Interest and Yields/Costs
(Dollars In Thousands)
(Unaudited)
 For the Six Months Ended June 30,
 20142013
 AverageInterest and  AverageInterest and  
 BalanceDividendsYield/CostBalanceDividendsYield/Cost
Interest-earning assets:            
Residential real estate  $ 881,638  $ 15,607  3.54%  $ 663,510  $ 12,873  3.88%
Commercial real estate 1,076,686 26,773  5.01 696,065 16,649  4.82
Construction 68,632 2,223  6.53 46,917 821  3.53
Commercial business 358,736 7,283  4.09 174,041 3,546  4.11
Installment and collateral 7,435 195  5.24 2,741 67  4.89
Investment securities 597,449 9,138  3.06 314,500 4,713  3.00
Federal Home Loan Bank stock 17,940 176  1.98 15,394 30  0.39
Other earning assets 29,268 39  0.27 32,788 42  0.26
Total interest-earning assets 3,037,784 61,434  4.06 1,945,956 38,741  4.00
             
Allowance for loan losses (19,605)     (18,589)    
Non-interest-earning assets 236,297     125,614    
Total assets  $ 3,254,476      $ 2,052,981    
             
Interest-bearing liabilities:            
NOW and money market accounts  $ 890,384 1,324  0.30  $ 552,226 744  0.27
Savings accounts 341,017 169  0.10 226,308 70  0.06
Certificates of deposit 893,096 3,811  0.86 531,645 3,048  1.16
Total interest-bearing deposits 2,124,497 5,304  0.50 1,310,179 3,862  0.59
Advances from the Federal Home Loan Bank 252,228 1,153  0.92 165,793 1,174  1.43
Other borrowings 55,330 225  0.82 9,838  25  0.51
Total interest-bearing liabilities 2,432,055 6,682  0.55 1,485,810 5,061  0.69
             
Non-interest-bearing liabilities 406,143     252,009    
Total liabilities 2,838,198     1,737,819    
Stockholders' equity 416,278     315,162    
Total liabilities and stockholders' equity  $ 3,254,476      $ 2,052,981    
             
Net interest-earning assets  $ 605,729      $ 460,146    
Tax-equivalent net interest income    54,752      33,680  
Tax-equivalent net interest rate spread     3.51     3.31
Tax-equivalent net interest margin     3.62     3.48
             
Average interest-earning assets to average interest-bearing liabilities     124.91     130.97
             
Less tax-equivalent adjustment    965      472  
Net interest income    $ 53,787      $ 33,208  
             
             
United Financial Bancorp, Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
(Dollars in Thousands)
(Unaudited)
           
 Three Months Ended
 June 30,March 31,December 31,September 30,June 30,
 20142014201320132013
           
Net (loss) income  $ (5,571)  $ 947  $ 1,757  $ 4,620  $ 3,299
Adjustments:          
Net interest income  (4,948)  --   --   --   -- 
Non-interest income  (589)  (268)  --   (29)  (329)
Non-interest expense  21,266  1,829  2,141  --   1,370
Income tax expense (benefit)  (4,346)  357  602  (8)  321
Net adjustment  11,383  1,204  1,539  (21)  720
Total operating net income  $ 5,812  $ 2,151  $ 3,296  $ 4,599  $ 4,019
           
Total net interest income  $ 36,879  $ 16,908  $ 16,976  $ 16,873  $ 16,701
Adjustments:          
Impact from purchase accounting fair value marks:          
(Accretion) / Amortization of loan mark  (3,388)  --   --   --   -- 
Accretion / (Amortization) of deposit mark  1,150  --   --   --   -- 
Accretion / (Amortization) of borrowings mark  410  --   --   --   -- 
Net adjustment  (4,948)  --   --   --   -- 
Total operating net interest income  $ 31,931  $ 16,908  $ 16,976  $ 16,873  $ 16,701
           
Total non-interest income  $ 6,319  $ 3,209  $ 2,959  $ 5,100  $ 4,108
Adjustments:          
Net gain on sales of securities  (589)  (268)  --   (29)  (329)
Total operating non-interest income  5,730  2,941  2,959  5,071  3,779
Total operating net interest income  31,931  16,908  16,976  16,873  16,701
Total operating revenue  $ 37,661  $ 19,849  $ 19,935  $ 21,944  $ 20,480
           
           
Total non-interest expense  $ 46,177  $ 18,257  $ 17,175  $ 14,763  $ 15,858
Adjustments:          
Merger and acquisition expense  (20,945)  (1,829)  (2,141)  --   -- 
Core deposit intangible amortization expense  (321)  --   --   --   -- 
Effect of position eliminations  --   --   --   --   (561)
Effect of branch lease termination agreement  --   --   --   --   (809)
Net adjustment  (21,266)  (1,829)  (2,141)  --   (1,370)
Total operating expense  $ 24,911  $ 16,428  $ 15,034  $ 14,763  $ 14,488
           
           
           
Total loans  $ 3,693,115  $ 1,756,611  $ 1,713,792  $ 1,653,712  $ 1,616,172
Legacy United loans  1,820,526  --  --  --  --
Total loans excluding legacy United  $ 1,872,589  $ 1,756,611  $ 1,713,792  $ 1,653,712  $ 1,616,172
Allowance for loan losses  $ 21,343  $ 19,500  $ 19,183  $ 18,703  $ 18,345
Allowance for loan losses to total loans 0.58% 1.11% 1.12% 1.13% 1.14%
Allowance for loan losses to total loans excluding legacy United 1.14% 1.11% 1.12% 1.13% 1.14%
           
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.
 
 
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 June 30, 2014
             
 GAAPMark to MarketOperating
  Interest  Yield/Cost Interest  Yield/Cost Interest  Yield/Cost
Loans:            
Residential real estate  $ 9,716 3.50%  $ (586) (0.23)%  $ 10,302 3.73%
Commercial real estate  18,291 5.37  2,431 0.73  15,860 4.64
Construction  1,804 8.05  789 3.68  1,015 4.37
Commercial business  5,253 4.52  756 0.69  4,497 3.83
Installment and collateral  173 5.48  (2) (0.20)  175 5.68
             
Certificates of deposit  2,240 0.75  (1,150) (0.39)  3,390 1.14
             
Borrowings:            
Advances from the Federal Home Loan Bank  569 0.73  (418) (0.55)  987 1.28
Other borrowings  173 1.07  8 0.06  165 1.01
             
Tax-equivalent net interest margin  37,516 3.88  4,948    32,568 3.36
             

CONTACT: Investor Relations Contact: Marliese L. Shaw Executive Vice President, Investor Relations Officer Rockville Bank: A Division of United Bank 860-291-3622 mshaw@rockvillebank.com Media Relations Contact: Adam J. Jeamel Vice President, Corporate Communications Rockville Bank: A Division of United Bank 860-291-3765 ajeamel@rockvillebank.com



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Source: United Financial Bancorp, Inc.


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