United Financial Bancorp, Inc. Announces Record Annual Earnings of $59.9 Million; $1.17 Earnings Per Share

HARTFORD, Conn., Jan. 22, 2019 (GLOBE NEWSWIRE) -- United Financial Bancorp, Inc. ("United Financial" or the "Company") (NASDAQ Global Select Stock Market: "UBNK"), the holding company for United Bank (the "Bank"), announced results for the quarter ended December 31, 2018.

The Company reported net income of $12.2 million, or $0.24 per diluted share, for the quarter ended December 31, 2018, compared to net income for the linked quarter of $16.3 million, or $0.32 per diluted share. The Company reported net income of $9.5 million, or $0.19 per diluted share, for the quarter ended December 31, 2017. Net income for the year ended December 31, 2018 was $59.9 million, or $1.17 per diluted share, compared to net income of $54.6 million, or $1.07 per diluted share, for the year ended December 31, 2017.

"In the fourth quarter of 2018, United Financial Bancorp, Inc. delivered annualized linked quarter loan growth of 9% and deposit growth of 12%, while maintaining pristine asset quality and a strong balance sheet," stated William H.W. Crawford, IV, Chief Executive Officer and President of the Company and the Bank. "I would like to thank our United employees for their continued steadfast focus on serving the needs of our customers and communities."

Balance Sheet

Assets totaled $7.36 billion at December 31, 2018, increasing $149.4 million from $7.21 billion at September 30, 2018.  At December 31, 2018, total loans were $5.66 billion, representing an increase of $127.9 million, or 2.3%, from the linked quarter. Changes to loan balances during the fourth quarter of 2018 were highlighted by a $40.5 million, or 10.9%, increase in other consumer loans, a $30.2 million, or 2.4%, increase in residential real estate loans, a $25.7 million, or 3.0%, increase in commercial business loans, a $22.2 million, or 1.2%, increase in investor non-owner occupied commercial real estate loans, a $9.3 million, or 11.8%, increase in commercial construction loans, and an $8.5 million, or 2.0%, increase in owner-occupied commercial real estate loans. Slightly offsetting the increased loan balances above was a $12.1 million, or 37.0%, decrease in residential construction loans from the linked quarter. Loans held for sale also decreased $8.2 million, or 9.4%, from the linked quarter. Total cash and cash equivalents increased $19.4 million, or 24.6%, from the linked quarter.

Deposits totaled $5.67 billion at December 31, 2018 and increased by $170.2 million, or 3.1%, from $5.50 billion at September 30, 2018. The increase in deposits was positively impacted by the Webster Bank deposit acquisition of $109.4 million that occurred in the beginning of October 2018. Increases in deposit balances during the fourth quarter of 2018 were highlighted by a $121.2 million, or 7.3%, increase in certificates of deposit balances, a $40.6 million, or 5.3%, increase in demand deposit balances, a $17.1 million, or 3.6%, increase in savings deposit balances, and an $11.8 million, or 1.4%, increase in NOW checking account balances. Slightly offsetting these increases was a $20.5 million, or 1.2%, decrease in money market account balances. The growth in the certificate of deposit account balances was attributable to the success of two retail pricing campaigns executed during the fourth quarter.

Total Federal Home Loan Bank advances decreased by $15.7 million, or 1.9%, over the linked quarter as the Company utilized excess cash from deposit growth to pay off maturing advances.

Net Interest Income

Net interest income decreased by $67,000, or 0.1%, on a linked quarter basis, to $48.4 million, primarily attributable to an increase in loan interest income of $2.2 million, or 3.5%, to $63.2 million, offset by an increase in interest expense of $2.1 million, or 9.6%, to $23.9 million. Average interest-earning assets increased by $37.3 million, or 0.6%, on a linked quarter basis, primarily due to growth in average loan balances, which increased by $61.8 million, or 1.1%. Average loan balance growth was driven by a $38.3 million, or 10.9%, increase in average other consumer loans, a $21.7 million, or 1.6%, increase in average residential real estate loans, and a $19.4 million, or 2.3%, increase in average commercial business loans. Slightly offsetting the increases was a $17.6 million, or 0.8%, decrease in average commercial real estate loans.

Interest expense increased by $2.1 million, or 9.6%, to $23.9 million during the fourth quarter of 2018, from $21.8 million in the linked quarter. Average interest-bearing deposit balances increased by $141.5 million, or 3.0%, on a linked quarter basis, primarily driven by a $68.3 million, or 2.7%, increase in average NOW and money market account balances, a $68.0 million, or 4.0%, increase in average certificates of deposits, and a $5.2 million, or 1.0%, increase in average savings account balances. Average non-interest bearing deposits increased by $18.4 million, or 2.5%, as compared to the linked quarter. Average Federal Home Loan Bank of Boston advances decreased by $111.2 million, or 13.2%, as the Company used funds obtained through deposit growth to pay down the maturing advances. The overall growth observed in average account balances is attributable to the continued success of the Company's retail deposit acquisition strategies.

The tax-equivalent net interest margin decreased by two basis points to 2.90% in the fourth quarter of 2018, from 2.92% in the linked period. The decline in the net interest margin was driven by a 14 basis point increase in the cost of interest-bearing liabilities, which was partially offset by a ten basis point increase in the yield of interest-earning assets. The interest-earning asset yield improvement was largely driven by a 33 basis point increase in the yield on commercial business loans, a 25 basis point increase in the yield on home equity loans, an eight basis point increase in the yield on residential real estate loans, and a three basis point increase in the yield on commercial real estate loans. The total cost of funds increased by 12 basis points to 1.48% in the fourth quarter of 2018 driven by a 16 basis point increase in the cost of interest-bearing deposits and a 17 basis point increase in the cost of Federal Home Loan Bank of Boston advances.

Provision for Loan Losses

The provision for loan losses totaled $2.6 million for the quarter ended December 31, 2018 as compared to $2.0 million for the linked quarter. Net charge-offs for the quarter ended December 31, 2018 totaled $891,000, or 0.06%, as a percentage of average loans outstanding, as compared to $1.3 million, or 0.09%, as a percentage of average loans for the quarter ended September 30, 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 slightly by $62,000, or 0.6%, to $9.5 million for the quarter ended December 31, 2018 from $9.6 million in the linked quarter. The decrease in the fourth quarter's non-interest income was driven primarily by decreases in income from mortgage banking activities 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 primarily by an increase in service charges and fees, as well as bank-owned life insurance income.

Non-Interest Expense

Non-interest expense for the quarter ended December 31, 2018 totaled $43.7 million and increased by $4.8 million, or 12.3%, from the linked quarter. The increase in non-interest expense during the quarter was primarily due to increases in salaries and employee benefits, occupancy and equipment, and the core deposit intangible amortization. These increases were primarily offset by decreases in other expenses and FDIC insurance assessment expenses as compared to the linked quarter.

The primary driver of the increase in non-interest expense occurred late in the quarter as the Company shifted its mortgage banking strategy to reflect our customers' preference to conduct business with us over the internet and through our direct sales channel. Consequently, we reduced staffing in our mortgage division, resulting in a $2.2 million severance expense (pre-tax) in the quarter ending December 31, 2018. Other notable increases in the quarter included a change in Company policy related to the carryover of unused vacation days by employees year-over-year, resulting in the Company recording $439,000 of additional expense. The Company also recorded lease impairment expense of $466,000 as a result of branch consolidation. Additionally, the Webster Bank branch acquisition also closed in the fourth quarter, resulting in $371,000 of other expenses related to this transaction.

Asset Quality

Asset quality remained strong and stable for the period, with non-performing assets increasing by $3.0 million to $32.1 million at December 31, 2018 from $29.0 million at September 30, 2018. The ratio of non-performing assets to total assets for the quarter ended December 31, 2018 was 0.44%, as compared to 0.40% in the linked quarter.

Capital

The Company reported Tangible Common Equity ("TCE") of $589.7 million, or 8.1% of average assets, for the quarter ended December 31, 2018. Tangible book value per share decreased slightly to $11.54 at December 31, 2018 from $11.55 at September 30, 2018. The decrease was primarily driven by the cash dividend payment to shareholders of $0.12 per share, an increase in intangibles associated with the Webster Bank branch acquisition, and the continued repurchase of Company stock during the quarter, which was slightly offset by the Company's net income of $12.2 million. Book value per share at December 31, 2018 was $13.94, as compared to $13.88 in the linked quarter.

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 February 1, 2019 and payable on February 13, 2019. This dividend equates to a 3.04% annualized yield based on the $15.78 average closing price of the Company's common stock in the fourth quarter of 2018. The Company has paid dividends for 51 consecutive quarters.

Investor Conference Call

United Financial Bancorp, Inc. will host a conference call on Wednesday, January 23, 2019 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 1-800-544-8281. A telephone replay of the call will be available through February 6, 2019 by calling 1-877-344-7529 and entering conference number 10127439. 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.

Annual Meeting

The Board of Directors approved May 13, 2019 as the date of the Company's 2019 Annual Meeting of Shareholders (the "Annual Meeting") and set the record date on which the Company's shareholders who will be eligible to vote at the Annual Meeting as the close of business on March 4, 2019.

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, small business, wealth management and consumer banking products and services to customers throughout Connecticut, Massachusetts and Rhode Island. United Bank is a financially strong, leading New England bank headquartered in Hartford, Connecticut with more than 50 branches in three states. United Financial Bancorp, Inc. trades on the NASDAQ Global Select Stock Exchange under the ticker symbol "UBNK." At December 31, 2018, the Company had $7.36 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. 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.

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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: