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

HARTFORD, Conn., Oct. 17, 2017 (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 September 30, 2017.

The Company reported net income of $15.2 million, or $0.30 per diluted share, for the quarter ended September 30, 2017, compared to net income for the linked quarter of $16.2 million, or $0.32 per diluted share. The Company reported net income of $14.2 million, or $0.28 per diluted share, for the quarter ended September 30, 2016.

"Management remains focused on our Four Key Objectives outlined in April 2016. In the third quarter of 2017, we delivered 7% year-over-year diluted earnings per share ("EPS") growth, 8% annualized linked quarter tangible book value growth, and delivered 40% of net earnings to our shareholders via a cash dividend, all while maintaining strong capital, liquidity, and asset quality. Annualized loan and deposit growth was 12% and 13%, respectively, for the quarter," stated William H.W. Crawford, IV, Chief Executive Officer of the Company and the Bank. "As always, I want to thank our United Bank teammates for their relentless focus on serving our customers and communities."

Balance Sheet

Assets totaled $6.98 billion at September 30, 2017 and increased $100.3 million, or 1.5%, from $6.88 billion at June 30, 2017. At September 30, 2017, total loans were $5.21 billion, representing an increase of $151.6 million, or 3.0%, from the linked quarter. Changes to loan balances during the third quarter of 2017 were highlighted by a $28.5 million, or 3.6%, increase in commercial business loans, a $23.7 million, or 4.4%, increase in home equity loans, and a $13.1 million, or 3.1%, increase in owner-occupied commercial real estate loans. Total residential mortgages increased during the third quarter of 2017 by $39.2 million, or 3.3%. Loans held for sale decreased $68.1 million, or 43.2%, from the linked quarter, as the Company delivered a large portion of the held for sale portfolio to third party investors at the end of the quarter. Total cash and cash equivalents increased $23.7 million, or 31.6%, from the linked quarter, while the available-for-sale securities portfolio remained relatively flat, with a slight decrease of $5.3 million, or 0.5%.

Deposits totaled $5.15 billion at September 30, 2017 and increased by $159.5 million, or 3.2%, from $4.99 billion at June 30, 2017. In the third quarter of 2017, NOW checking deposits increased by $47.2 million, or 7.5%, from the linked quarter, while non-interest bearing checking deposits increased by $3.2 million, or 0.4%.   Money market deposits increased by $160.1 million, or 11.8%, from the linked quarter. The increases in NOW and money market deposits are reflective of continued success in sourcing new commercial deposit relationships, coupled with the seasonal return of municipal deposits. These increases were slightly offset by a $34.7 million, or 2.0%, decrease in certificates of deposit.

Total Federal Home Loan Bank advances decreased by $39.7 million, or 4.0%, over the linked quarter, while other borrowings decreased by $30.4 million, or 20.4%, due to a decrease in the use of reverse repurchase borrowings.

Net Interest Income

Income growth in the third quarter of 2017, as compared to the linked quarter, was highlighted by an increase in net interest income of $440,000, or 0.9%, to $46.8 million, primarily attributable to an increase in interest income of $2.2 million, or 3.8%, to $60.8 million.  Average interest-earning assets increased by $118.9 million, or 1.9%, primarily due to growth in average loan balances, which increased by $105.7 million, or 2.1%.  Average loan balance growth was driven by a $57.7 million, or 2.7%, increase in average commercial real estate loans, a $25.7 million, or 2.0%, increase in average residential real estate loans, inclusive of loans held for sale, and a $11.0 million, or 1.4%, increase in average commercial business loans.

Interest expense increased by $1.8 million to $14.0 million during the third quarter of 2017, from $12.2 million in the linked quarter. Average balance shifts in the third quarter of 2017 included a $175.9 million, or 9.1%, increase in average NOW and money market deposits, and a $16.2 million, or 1.0%, increase in average certificates of deposit. The growth observed in average deposit balances was largely driven by continued success in new account acquisition strategies.

The non-GAAP tax equivalent net interest margin decreased by four basis points to 3.00% in the third quarter from the linked period. The decline was largely driven by duration extension decisions made in the period, resulting in an increase in the cost of interest-bearing liabilities. The interest-earning asset yield improvement was largely driven by a seven basis point increase in the yield on commercial real estate loans, which represents 34.4% of the Company's interest-earning assets, a 13 basis point increase in the average home equity loan yield, and a 17 basis point increase in the average commercial business loan yield. The increase in the loan portfolio yield was further driven by increases in the 1-month LIBOR and Prime rate indices. The total funding cost increased by ten basis points to 0.91% in the third quarter driven by a ten basis point increase in the cost of interest-bearing deposits, which represents 80.1% of costing liabilities, while the cost of Federal Home Loan Bank advances increased 19 basis points.

Provision for Loan Losses

The provision for loan losses remained relatively flat, totaling $2.6 million at September 30, 2017 as compared to $2.3 million for the linked quarter. Net charge-offs for the quarter ended September 30, 2017 totaled $1.3 million, or 0.10%, as a percentage of average loans outstanding, as compared to $534,000, or 0.04% as a percentage of average loans for the quarter ended June 30, 2017. 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 economic and credit conditions, the direction of real estate values and delinquency trends.

Non-Interest Income

Total non-interest income decreased by $1.4 million, or 14.8%, to $8.1 million for the quarter ended September 30, 2017 from $9.5 million in the linked quarter. The decrease in the third quarter's non-interest income was driven primarily by a decrease in service charges and fees and mortgage banking activities as compared to the linked quarter. Additionally, there were higher losses on limited partnership investments as compared to the linked quarter.

Non-Interest Expense

Non-interest expense for the quarter ended September 30, 2017 totaled $34.9 million and decreased by $70,000, or 0.2%, from the linked quarter. The decrease in non-interest expense during the quarter was primarily due to a decrease in marketing and promotions and other expenses, partially offset by an increase in salaries and employee benefits, professional fees, and occupancy and equipment expenses as compared to the linked quarter.

Asset Quality

Asset quality remained strong and stable for the period, with non-performing assets decreasing by $432,000 to $33.9 million at September 30, 2017 from $34.3 million at June 30, 2017. The ratio of non-performing assets to total assets for the quarter ended September 30, 2017 was 0.49%, as compared to 0.50% in the linked quarter.

Capital

The Company reported Tangible Common Equity ("TCE") of $570.5 million, or 8.3% of average assets, at September 30, 2017. Tangible book value per share increased to $11.23 at September 30, 2017 from $11.01 at June 30, 2017. The increase was primarily driven by the impact of the Company's net income of $15.2 million, partially offset by the cash dividend payment to shareholders of $0.12 per share, which reduced stockholders' equity by $6.1 million. Book value per share at September 30, 2017 was $13.59.

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 October 27, 2017 and payable on November 8, 2017. This dividend equates to a 2.76% annualized yield based on the $17.38 average closing price of the Company’s common stock in the third quarter of 2017. The Company has paid dividends for 46 consecutive quarters.

Investor Conference Call

United Financial Bancorp, Inc. will host a conference call on Wednesday, October 18, 2017 at 10:00 a.m. Eastern Time (ET) to discuss the Company’s third 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 November 1, 2017 by calling 1-877-344-7529 and entering conference number 10112041. 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 September 30, 2017, the Company had $6.98 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 on pages F-10 through F-12 in the accompanying financial tables. 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.

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: