United Financial Bancorp, Inc. Announces Second Quarter Earnings and Quarterly Dividend

HARTFORD, Conn., July 17, 2018 (GLOBE NEWSWIRE) -- United Financial Bancorp, Inc. ("United Financial" or the "Company") (NASDAQ:UBNK), the holding company for United Bank (the "Bank"), announced results for the quarter ended June 30, 2018.

The Company reported net income of $15.6 million, or $0.31 per diluted share, for the quarter ended June 30, 2018, compared to net income for the linked quarter of $15.8 million, or $0.31 per diluted share. The Company reported net income of $16.2 million, or $0.32 per diluted share, for the quarter ended June 30, 2017.

"In the second quarter of 2018, United Financial Bancorp, Inc.'s earnings results reflected solid linked quarter net interest margin expansion and net interest income growth. Our Company continues to grow loans, deposits, particularly checking accounts, and tangible book value while maintaining strong asset quality, capital and liquidity," stated William H.W. Crawford, IV, Chief Executive Officer and President of the Company and the Bank. "I want to thank our United Bank employees for their steadfast support of our customers and communities."

Balance Sheet

Assets totaled $7.21 billion at June 30, 2018 and increased $139.9 million, or 2.0%, from $7.07 billion at March 31, 2018. At June 30, 2018, total loans were $5.48 billion, representing an increase of $93.2 million, or 1.7%, from the linked quarter. Changes to loan balances during the second quarter of 2018 were highlighted by an $85.1 million, or 4.6%, increase in investor non-owner occupied commercial real estate loans, a $22.0 million, or 7.1%, increase in other consumer loans, a $16.8 million, or 1.4%, increase in residential real estate loans and a $6.4 million, or 1.1%, increase in home equity loans. Loans held for sale increased $22.1 million, or 34.8%, from the linked quarter, as the Company observed an increase in saleable residential loan volumes during the second quarter of 2018. Total cash and cash equivalents increased $39.9 million, or 57.7%, from the linked quarter.

Deposits totaled $5.39 billion at June 30, 2018 and increased by $110.9 million, or 2.1%, from $5.28 billion at March 31, 2018. Increases in deposit balances during the second quarter of 2018 were highlighted by a $202.0 million, or 14.5%, increase in money market account balances, a $21.2 million, or 2.6%, increase in NOW checking account balances, and a $17.4 million, or 2.3%, increase in demand deposit account balances. Offsetting these increases were a $116.2 million, or 6.5%, decrease in certificate of deposit balances and a $13.5 million, or 2.6%, decrease in savings deposits.

Total Federal Home Loan Bank advances increased by $11.5 million, or 1.3%, over the linked quarter as the Company continued to utilize advances as an asset liability management tool through cash flow hedging strategies.

Net Interest Income

Net interest income increased by $1.6 million, or 3.5%, on a linked quarter basis, to $48.2 million, primarily attributable to an increase in loan interest income of $3.2 million, or 5.8%, to $58.0 million; the increase was offset by an increase in interest expense of $2.0 million, or 11.8%, to $18.9 million. Average interest-earning assets increased by $16.8 million, or 0.3%, primarily due to growth in average loan balances, which increased by $49.2 million, or 0.9%. Average loan balance growth was driven by a $25.0 million, or 1.1%, increase in average commercial real estate loans, a $23.8 million, or 1.8%, increase in average residential real estate loans, a $22.3 million, or 7.4%, increase in other consumer loans, and a $9.3 million, or 1.6%, increase in home equity loans. Average commercial business loan balances decreased by $26.7 million, or 3.2%, as the Company observed increased prepayment speeds in the shared national credit portfolio.

Interest expense increased by $2.0 million, or 11.8%, to $18.9 million during the second quarter of 2018, from $17.0 million in the linked quarter. Average interest-bearing deposit balances increased by $68.8 million, or 1.5%, primarily driven by a $109.4 million, or 5.1%, increase in average NOW and money market account balances, and a $7.0 million, or 1.4%, increase in average savings account balances. Average non-interest bearing demand deposits increased by $25.1 million, or 3.5%, as compared to the linked quarter.  Offsetting the aforementioned increases was a $47.6 million, or 2.6%, decrease in average certificate of deposit balances. The overall growth observed in average account balances is attributable to the continued success of the Company's municipal and retail acquisition strategies.

The tax equivalent net interest margin increased by seven basis points to 2.97% in the second quarter of 2018, from 2.90% in the linked period. The improvement in the net interest margin was driven by an 18 point increase in the yield on earning assets, which was partially offset by a 13 basis point increase in the cost of interest bearing liabilities. The interest-earning asset yield improvement was largely driven by a ten basis point increase in the yield on commercial real estate loans, a 45 basis point increase in the yield on commercial business loans, a 22 basis point increase in the investment portfolio yield, a nine basis point increase in the yield on residential real estate loans and a 24 basis point increase in the home equity loan yield. The total cost of funds increased by 13 basis points to 1.20% in the second quarter driven by a 14 basis point increase in the cost of interest-bearing deposits and an 18 basis point increase in the cost of Federal Home Loan Bank of Boston advances.

Provision for Loan Losses

The provision for loan losses totaled $2.4 million for the quarter ended June 30, 2018 as compared to $1.9 million for the linked quarter. Net charge-offs totaled $1.1 million, or 0.08%, as a percentage of average loans outstanding for both quarters ended June 30, 2018 and March 31, 2018. Factors considered in the provision for loan losses include, but are not limited to, historical charge-offs, the composition of the portfolio, the current level of non-performing loans and charge-offs, local and national economic and credit conditions, the direction of real estate values and delinquency trends.

Non-Interest Income

Total non-interest income decreased by $929,000, or 10.0%, to $8.4 million for the quarter ended June 30, 2018 from $9.3 million in the linked quarter. The decrease in the second quarter's non-interest income was driven by decreases in income from mortgage banking activities, net gain on sales of securities and other income. Additionally, there were higher losses on limited partnership investments as compared to the linked quarter, which contributed to the overall decrease in non-interest income. These decreases were offset by increases in both service charges and fees and bank-owned life insurance income.

Non-Interest Expense

Non-interest expense for the quarter ended June 30, 2018 totaled $38.4 million and increased by $1.6 million, or 4.4%, from the linked quarter. The increase in non-interest expense during the quarter was due to increases in salaries and employee benefits, other non-interest expenses, and marketing and promotions. These increases were primarily offset by a decrease in occupancy and equipment as compared to the linked quarter.

Asset Quality

Asset quality remained strong and stable for the period, with non-performing assets decreasing by $2.4 million to $31.3 million at June 30, 2018 from $33.7 million at March 31, 2018. The ratio of non-performing assets to total assets for the quarter ended June 30, 2018 was 0.43%, as compared to 0.48% in the linked quarter.

Capital

The Company reported Tangible Common Equity ("TCE") of $582.7 million, or 8.2% of average assets, for the quarter ended June 30, 2018. Tangible book value per share increased to $11.40 at June 30, 2018 from $11.25 at March 31, 2018. The increase was primarily driven by the impact of the Company's net income of $15.6 million, partially offset by the cash dividend payment to shareholders of $0.12 per share, as well as increases in accumulated other comprehensive losses as a result of a decrease in the market value of the Company's investment portfolio, as compared to the previous quarter. Book value per share at June 30, 2018 was $13.73.

Dividend

The Board of Directors declared a cash dividend on the Company’s common stock of $0.12 per share to shareholders of record at the close of business on July 27, 2018 and payable on August 8, 2018. This dividend equates to a 2.80% annualized yield based on the $17.17 average closing price of the Company’s common stock in the second quarter of 2018. The Company has paid dividends for 49 consecutive quarters.

Investor Conference Call

United Financial Bancorp, Inc. will host a conference call on Wednesday, July 18, 2018 at 10:00 a.m. Eastern Time (ET) to discuss the Company’s second quarter results. Those wishing to participate in the call may dial toll-free 1-800-544-8281. A telephone replay of the call will be available through August 1, 2018 by calling 1-877-344-7529 and entering conference number 10121371. 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.

Investor Presentation

United Financial Bancorp, Inc. has prepared and furnished a visual slide presentation to accompany the earnings press release and investor conference call. The presentation has been furnished as an exhibit to the SEC Form 8-K, but is not included in this press release. Copies of the presentation may be accessed on the Company’s investor relations website (www.unitedfinancialinc.com) by selecting “News & Market Data,” then “Presentations;” or via the IRapp and selecting “Presentations;” or directly from SEC EDGAR.

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 Connecticut and Massachusetts. United Bank is a financially strong, leading New England bank with more than 50 branches in two states and several commercial and residential loan production offices. United Financial Bancorp, Inc. trades on the NASDAQ Global Select Stock Exchange under the ticker symbol “UBNK.” At June 30, 2018, the Company had $7.21 billion in assets.

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.

Non-GAAP Financial Measures

This document contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles (“GAAP”). These non-GAAP measures provide supplemental perspectives on operating results, performance trends, and financial condition. They are not a substitute for GAAP measures; they should be read and used in conjunction with the Company’s GAAP financial information. A reconciliation of non-GAAP financial measures to GAAP measures is included in the accompanying financial tables below. These non-GAAP financial measures provide information for investors to effectively analyze financial trends of our business activities, and to enhance comparability with peers across the financial services sector.

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.

(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) Calculations of these non-GAAP metrics are provided after the reconciliations of non-GAAP financial measures and appear on page F-10 through page F-12.
(3) The cost of funds ratio represents interest incurred on liabilities as a percentage of average non-interest bearing deposits and interest-bearing liabilities.

(1)  Tax-equivalent net interest rate spread represents the difference between yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(2)  Tax-equivalent net interest rate margin represents tax-equivalent net interest income divided by average interest-earning assets.

(1)  Tax-equivalent net interest rate spread represents the difference between yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(2)  Tax-equivalent net interest rate margin represents tax-equivalent net interest income divided by average interest-earning assets.

(1)  Tax-equivalent net interest rate spread represents the difference between yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(2)  Tax-equivalent net interest rate margin represents tax-equivalent net interest income divided by average interest-earning assets.

United Financial Bancorp, Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
(Dollars In Thousands)
(Unaudited)

In addition to evaluating the Company’s results of operations in accordance with GAAP, management periodically supplements this evaluation with an analysis of certain non-GAAP financial measures. These non-GAAP measures are intended to provide the reader with additional perspectives on operating results, financial condition, and performance trends, while facilitating comparisons with the performance of other financial institutions. Non-GAAP financial measures are not a substitute for GAAP measures, rather, they should be read and used in conjunction with the Company’s GAAP financial information.

The efficiency ratio is used as a common measure by banks as a comparable metric to understand the Company’s expense structure relative to its total revenue; in other words, for every dollar of total revenue we recognize, how much of that dollar is expended. In order to improve the comparability of the ratio to our peers, we remove non-core items. To improve transparency, and acknowledging that banks are not consistent in their definition of the efficiency ratio, we include our calculation of this non-GAAP measure.

Pre-provision net revenue is a measure that the Company uses to understand fundamental operating performance before credit related expenses and tax expense. It is often expressed as a ratio relative to average assets which demonstrates the “core” performance and can be viewed as an alternative measure of how efficiently the Company services its asset base.

Return on average tangible common equity is used by management and readers of our financial statements to understand how efficiently the Company is deploying its common equity. Companies that are able to demonstrate more efficient use of common equity are more likely to be viewed favorably by current and prospective investors.

The Company believes that disclosing these non-GAAP metrics is both useful internally and is expected by our investors and analysts in order to understand the overall performance of the Company. Other companies may calculate and define their supplemental data differently. A reconciliation of GAAP financial measures to non-GAAP measures and other performance ratios, as adjusted, are included on pages F-10 through F-12 in the following press release tables:

(1) Represents limited partnership writedowns related to the reduction of the Company's tax rate in December 2017.
(2) Represents acquired loans that were recorded at fair value. These loans carry no allowance for loan losses for the periods reflected above.

(1) Intangible assets amortization is tax effected at 21% for the three months ended June 30, 2018 and March 31, 2018, and at 35% for all prior periods due to the Tax Cuts and Jobs Act of 2017 that was signed into law in December 2017, lowering the corporate federal tax rate from 35% to 21%.