United Financial Bancorp, Inc. Announces Fourth Quarter Earnings And Quarterly Dividend

HARTFORD, Conn., Jan. 23, 2018 /PRNewswire/ -- 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, 2017.

The Company reported net income of $9.5 million, or $0.19 per diluted share, for the quarter ended December 31, 2017, compared to net income for the linked quarter of $15.2 million, or $0.30 per diluted share. The Company reported net income of $14.6 million, or $0.29 per diluted share, for the quarter ended December 31, 2016. Net income for the year ended December 31, 2017 was $54.6 million, or $1.07 per diluted share, compared to net income of $49.7 million, or $0.99 per diluted share, for the year ended December 31, 2016.

On December 22, 2017, President Donald Trump signed into law the Tax Cuts and Jobs Act of 2017, that, among other things, lowered the corporate tax rate from 35% to 21%. Companies must recognize the effect of tax law changes in the period of enactment under the generally accepted accounting principles ("GAAP"). This tax reform resulted in a $2.8 million negative net income impact in the fourth quarter of 2017. Of the $2.8 million impact, $1.6 million flowed directly through the provision for income taxes, and was primarily related to a re-measurement of the Company's deferred tax asset. Additionally, there was a $1.2 million pre-tax adjustment related to the write-down of legacy United limited partnerships due to the aforementioned tax reform. Other significant events during the quarter included the Company surrendering $32.8 million of under-performing bank-owned life insurance ("BOLI") policy value, resulting in a $2.4 million negative impact to the provision for income taxes. The Company subsequently re-invested $30.0 million into higher yielding product in early January 2018.

"The United Bank team delivered strong loan and non-interest bearing deposit growth in the fourth quarter of 2017. Asset quality, capital, and liquidity remained strong and stable," stated William H.W. Crawford, IV, Chief Executive Officer and President of the Company and the Bank. "I want to thank our United Bank teammates for their steadfast focus on serving our customers and communities."

Balance Sheet

Assets totaled $7.11 billion at December 31, 2017 and increased $137.7 million, or 2.0%, from $6.98 billion at September 30, 2017. At December 31, 2017, total loans were $5.34 billion, representing an increase of $134.2 million, or 2.6%, from the linked quarter. Changes to loan balances during the fourth quarter of 2017 were highlighted by a $76.7 million, or 4.3%, increase in investor non-owner occupied commercial real estate loans, a $24.9 million, or 9.3%, increase in other consumer loans, a $21.4 million, or 3.8%, increase in home equity loans, and a $18.9 million, or 2.3%, increase in commercial business loans. Loans held for sale increased  $24.7 million, or 27.6%, from the linked quarter, as the Company increased the held-for-sale portfolio for delivery to third party investors at the end of the quarter. Total cash and cash equivalents decreased $9.8 million, or 10.0%, from the linked quarter.

Deposits totaled $5.20 billion at December 31, 2017 and increased by $45.2 million, or 0.9%, from $5.15 billion at September 30, 2017. Increases in deposit balances during the fourth quarter of 2017 were highlighted by a $53.4 million, or 7.4%, increase in non-interest-bearing checking deposits, as well as a $77.3 million, or 4.5%, increase in certificates of deposit. Offsetting these increases was a $75.5 million, or 3.4%, decline in NOW checking and money market deposits, largely due to seasonal withdrawals in municipal funds that are experienced during the fourth quarter.

Total Federal Home Loan Bank advances increased by $95.9 million, or 10.1%, over the linked quarter as a source of funding for loan demand and municipal deposit outflows.

Net Interest Income

Net interest income increased by $81,000, or 0.2%, on a linked quarter basis, to $46.8 million, primarily attributable to an increase in interest income of $928,000, or  1.5%, to $61.7 million.  Average interest-earning assets increased by $57.2 million, or 0.9%, primarily due to growth in average loan balances, which increased by $90.4 million, or 1.7%.  Average loan balance growth was driven by a $32.5 million, or 6.1%, increase in home equity loans, a $25.9 million, or 10.3%, increase in other consumer loans, a $23.3 million, or 1.1%, increase in average commercial real estate loans, and a $21.9 million, or 2.8%, increase in average commercial business loans. Average residential real estate loan balances declined by $12.9 million, or 1.0%, as the Company continues to actively sell loan originations in the secondary market.

Interest expense increased by $847,000, or 6.0%, to $14.9 million during the fourth quarter of 2017, from $14.0 million in the linked quarter. Average balance shifts in the fourth quarter of 2017 included a $19.4 million, or 0.9%, increase in average NOW and money market deposits, and a $33.3 million, or 1.9%, increase in average certificates of deposit. Slightly offsetting the aforementioned increases was a $9.6 million, or 1.8%, decrease in average savings account balances. The overall growth observed in average deposit balances was largely driven by continued success in new account acquisition strategies.

The tax equivalent net interest margin decreased by two basis points to 2.98% in the fourth quarter from the linked period. As compared to the linked quarter, the decline was largely driven by an increase of five basis points in the cost of interest-bearing liabilities to 1.07%, offset by a three basis point increase in the yield on interest-earning assets to 3.89%. The interest-earning asset yield improvement was largely driven by a 14 basis point increase in the yield on residential real estate loans, which represents 20.2% of the Company's interest-earning assets, an eight basis point increase in the average investment portfolio yield, and a one basis point increase in the average home equity loan yield. The total cost of funds increased by five basis points to 0.96% in the fourth quarter driven by a seven basis point increase in the cost of interest-bearing deposits, while the cost of Federal Home Loan Bank advances increased five basis points. The Company observed favorable growth of $37.1 million, or 5.3%, in average non-interest bearing deposit balances on a linked quarter basis.

Provision for Loan Losses

The provision for loan losses remained relatively flat, totaling $2.3 million for the quarter ended December 31, 2017 as compared to $2.6 million for the linked quarter. Net charge-offs for the quarter ended December 31, 2017 totaled $1.5 million, or 0.11%, as a percentage of average loans outstanding, as compared to $1.3 million, or 0.10% as a percentage of average loans for the quarter ended September 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 $727,000, or 9.0%, to $7.3 million for the quarter ended December 31, 2017 from $8.1 million in the linked quarter. The decrease in the fourth quarter's non-interest income was driven primarily by decreases in services charges and fees and other income. There was also a decrease in limited partnership investments as a result of the previously discussed writedown due to the Tax Cuts and Jobs Act, which was signed into law in December 2017, resulting in a decrease of future tax benefits of these investments. These decreases were offset by an increase in bank-owned life insurance income due to the receipt of a death benefit settlement.

Non-Interest Expense

Non-interest expense for the quarter ended December 31, 2017 totaled $37.0 million and increased by $2.1 million, or 6.0%, from the linked quarter. The increase in non-interest expense during the quarter was primarily due to an increase in occupancy and equipment, mainly due to accelerated lease expense recognized in the fourth quarter on a property that the Company no longer occupies, as well as an increase in salaries and employee benefits. These increases were partially offset by decreases in professional fees and marketing and promotions, as compared to the linked quarter.

Asset Quality

Asset quality remained strong and stable for the period, with non-performing assets decreasing by $45,000 to $33.8 million at December 31, 2017 from $33.9 million at September 30, 2017. The ratio of non-performing assets to total assets for the quarter ended December 31, 2017 was 0.48%, as compared to 0.49% in the linked quarter.

Capital

The Company reported Tangible Common Equity ("TCE") of $573.6 million, or 8.2% of average assets, for the quarter ended December 31, 2017. Tangible book value per share increased to $11.24 at December 31, 2017 from $11.23 at September 30, 2017. The increase was primarily driven by the impact of the Company's net income of $9.5 million, partially offset by the cash dividend payment to shareholders of $0.12 per share, as well as a decrease in accumulated other comprehensive income 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 December 31, 2017 was $13.58.

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 2, 2018 and payable on February 14, 2018. This dividend equates to a 2.64% annualized yield based on the $18.20 average closing price of the Company's common stock in the fourth quarter of 2017. The Company has paid dividends for 47 consecutive quarters.

Investor Conference Call

United Financial Bancorp, Inc. will host a conference call on Wednesday, January 24, 2018 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 7, 2018 by calling 1-877-344-7529 and entering conference number 10115483. 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 17, 2018 as the date of the Company's 2018 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 8, 2018.

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 December 31, 2017, the Company had $7.11 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.

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-13 in the following press release tables:

SOURCE United Financial Bancorp, Inc.

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