United Financial Bancorp Reports First Quarter 2010 Results and Declares Dividend of $0.07 Per Share

WEST SPRINGFIELD, Mass., April 16 /PRNewswire-FirstCall/ -- United Financial Bancorp, Inc. (the "Company") (Nasdaq: UBNK), the holding company for United Bank (the "Bank"), reported net income of $1.8 million, or $0.11 per diluted share, for the first quarter of 2010 compared to net income of $2.1 million, or $0.14 per diluted share, for the corresponding period in 2009. Excluding acquisition related costs totaling $979,000 ($808,000 net of tax benefit) net income would have been $2.6 million, or $0.16 per diluted share, for the first quarter of 2010.  

The improved quarterly operating results (excluding acquisition related expenses) were primarily due to growth in net interest income, driven by net interest margin expansion and an increase in average interest earning assets, as well as an increase in fee income.  These items were partially offset by a higher provision for loan losses, a $145,000 non-cash, non-deductible charge for other-than-temporary-impairment of an investment security and an increase in non-interest expense.  The improvement in earnings per share (excluding acquisition related costs) was influenced by growth in earnings (excluding acquisition related costs) and the positive impact of stock repurchases. The Company also announced a quarterly cash dividend of $0.07 per share, payable on May 27, 2010 to shareholders of record as of May 6, 2010.  

Total assets declined $28.4 million, or 1.8%, to $1.513 billion at March 31, 2010, from $1.541 billion at December 31, 2009 mainly due to decreases of $21.2 million, or 1.9%, in total loans and $9.9 million, or 3.2%, in investment securities.  Total deposits increased $26.3 million, or 2.5%, to $1.065 billion at March 31, 2010 from $1.039 billion at December 31, 2009 primarily reflecting growth of $36.9 million, or 6.6%, in core account balances, partially offset by a decrease of $10.7 million, or 2.2%, in certificates of deposit.  Total borrowings declined $53.3 million, or 20.4%, as a result of paydowns of FHLB advances using cash flows from the loan and investment portfolios and increased deposit levels.  At March 31, 2010, the Company continued to have considerable liquidity including significant unused borrowing capacity at the Federal Home Loan Bank and the Federal Reserve Bank and access to funding through the repurchase agreement and brokered deposit markets.  The Company's balance sheet is also supported by a strong capital position, with a tangible equity-to-tangible assets ratio of 14.39% at March 31, 2010.

"We are extremely pleased to report that the integration of United Bank and Commonwealth National Bank was completed in the first quarter with the successful conversion of all systems.  Beginning in March, we were able to devote our resources to fully deploying our brand of banking in the Worcester area," commented Richard B. Collins, President and Chief Executive Officer.  "Our improved quarterly operating results reflect a positive contribution from our Worcester franchise as well as our success in attracting and retaining loan and core deposit relationships, effectively managing credit and interest rate risks and maintaining a healthy balance sheet, significant liquidity and a substantial capital base."  

Financial Highlights:

• Total investment securities decreased $9.9 million, or 3.2%, to $296.5 million at March 31, 2010 from $306.5 million at December 31, 2009 reflecting prepayments and normal amortization of the existing mortgage-backed securities portfolio. At March 31, 2010, approximately 91% of the investment portfolio consisted of mortgage-backed and debt securities issued by government-sponsored enterprises.

• Total loans decreased $21.2 million, or 1.9%, to $1.101 billion at March 31, 2010 from $1.122 billion at December 31, 2009 reflecting the sale of $9.7 million in lower coupon, fixed rate residential mortgages.  The residential real estate and commercial portfolios were also affected by slower origination volume, loan prepayments and normal amortization.  

• Non-performing assets totaled $18.4 million, or 1.22% of total assets, at March 31, 2010 compared to $17.9 million, or 1.16% of total assets, at December 31, 2009.  The increase of $576,000 in non-performing assets was primarily attributable to an increase of $431,000 in OREO balances.  The Company's total non-performing assets include a $3.5 million commercial real estate loan which was restructured during the first quarter of 2010, is classified as a troubled debt restructure and has been placed on non-accrual status.  Although this loan will be returned to accruing status after the borrower is current on the new payments for a period of six months, it will continue to be included in non-performing assets.  Management expects that several impaired loans with active workout plans will be substantially paid down or paid in full by the end of the second quarter of 2010.  

• At March 31, 2010, the allowance for loan losses to total loans was 0.87% and the allowance for loan losses to total non-performing loans was 58.38%.  In accordance with generally accepted accounting principles, the Company recorded the loans acquired from Commonwealth National Bank at fair value and recognized the credit mark on loans purchased from other financial institutions as a component of fair value.  At March 31, 2010, the remaining balance of the loan fair value adjustments was $6.4 million, or 2.4% of the total $262.9 million in outstanding purchased loans. Excluding the $240.5 million outstanding balance of loans acquired from Commonwealth National Bank and $22.4 million outstanding balance of loans purchased from other financial institutions, the ratio of the allowance for loan losses to total loans would have been 1.15%.  Excluding the $2.7 million outstanding balance of non-performing loans acquired from Commonwealth National Bank, the ratio of the allowance for loan losses to non-performing loans would have been 69.76%.  For the quarter ended March 31, 2010, net charge-offs totaled $304,000 or 0.11% of average loans outstanding.  

• Total deposits increased $26.3 million, or 2.5%, to $1.065 billion at March 31, 2010 compared to $1.039 billion at December 31, 2009 reflecting growth of $36.9 million, or 6.6%, in core account balances, partially offset by a decrease of $10.7 million, or 2.2%, in certificates of deposit.  The strong growth in core account balances was driven by the success of sales and marketing initiatives in our new Worcester markets, competitive products and pricing, excellent customer service and targeted promotional activities.  Core deposit balances were $597.6 million, or 56.1% of total deposits at March 31, 2010 compared to $560.7 million, or 54.0% at December 31, 2009.

• Total stockholders' equity declined $1.0 million, or 0.5%, to $224.2 million at March 31, 2010 from $225.2 million at December 31, 2009 due to 163,386 shares repurchased totaling $2.1 million and cash dividends totaling $1.1 million, partially offset by net income of $1.8 million.

• Net interest income increased $3.3 million, or 32.9%, to $13.5 million for the first quarter of 2010 from $10.2 million for the same period in 2009 as a result of net interest margin expansion and an increase in average interest earning assets.  Net interest margin increased 37 basis points to 3.76% for the three months ended March 31, 2010, from 3.39% for the same period in 2009 due to amortization of certain acquisition accounting adjustments totaling $732,000 and improved spreads.  These items were partially offset by an increased cost to fund share repurchases, growth in excess cash balances held in low yielding Federal Reserve Bank and Federal Home Loan Bank accounts and an increase in non-performing loans. Total average earning assets increased $236.2 million, or 19.7%, to $1.434 billion for the first quarter of 2010 due in large part to the acquisition of Commonwealth National Bank in the fourth quarter of 2009 and to a lesser extent loan origination activity.  These items were partially offset by 2009 loan and investment security sales as well as prepayments and normal amortization of the existing loan and mortgage-backed securities portfolio.

• The provision for loan losses rose by $193,000, or 35.7%, to $733,000 for the three months ended March 31, 2010 driven by an increase in specific reserves for impaired commercial real estate loans.

• Non-interest income increased by $186,000, or 10%, to $2.0 million for the three months ended March 31, 2010, mainly attributable to growth in deposit service charges of $264,000 or 23.8%, partially offset by the other than temporary impairment charge of an investment security of $145,000 and a decrease in gains on sales of loans of $37,000 or 29.6%.  Fee income on depositors' accounts increased as a result of growth in accounts and transactions.

• Non-interest expense grew $3.9 million, or 47.4%, to $12.0 million for the first quarter of 2010 from $8.2 million in the same period last year.  Excluding acquisition related costs totaling $979,000, total non-interest expense would have been $11.0 million, $2.9 million or 35.4% higher than the same period last year.  Salaries and benefits increased $1.4 million, or 30.3%, mainly due to costs incurred to operate our new Worcester franchise and, to a lesser extent, staffing costs related to our Chicopee branch opened in the second quarter of 2009 and annual wage increases.  Occupancy costs grew $262,000, or 39.4%, principally attributable to expenses incurred to operate our new Worcester facilities, and to a lesser extent, the new Chicopee branch.  Marketing expenses increased $218,000, or 63.7%, in connection with advertising and promotional expenses for our Worcester franchise.  Data processing costs increased $223,000, or 26.4%, reflecting expenses for our new Worcester accounts and a larger loan and deposit account base in our Springfield market.  Other expenses increased $574,000, or 65.5%, largely related to additional costs for the Worcester operations.  

United Financial Bancorp, Inc. is a publicly owned corporation and the holding company of United Bank, a federally chartered savings bank headquartered at 95 Elm Street, West Springfield, MA 01090. United Bank operates 16 full service branch offices and two express drive-up branches located throughout Hampden and Hampshire Counties in Western Massachusetts and six full service branch offices located in Worcester County.   Through its Wealth Management Group and its partnership with NFP Securities, Inc., the Bank is able to offer access to a wide range of investment and insurance products and services, as well as financial, estate and retirement strategies and products.  For more information regarding the Bank's products and services and for United Financial Bancorp, Inc. investor relations information, please visit www.bankatunited.com.

Except for the historical information contained in this press release, the matters discussed in this press release may be deemed to be forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties, including changes in economic conditions in the Company's market area, changes in policies by regulatory agencies, fluctuations in interest rates, demand for loans in the Company's market area, competition, and other risks detailed from time to time in the Company's SEC reports.  Actual strategies and results in future periods may differ materially from those currently expected.  These forward-looking statements represent the Company's judgment as of the date of this release.  The Company disclaims, however, any intent or obligation to update these forward-looking statements.

SOURCE United Financial Bancorp, Inc.

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