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Press Release

United Financial Bancorp, Inc. Announces Third Quarter Earnings

Company Release - 10/18/2019 8:12 AM ET

HARTFORD, Conn., Oct. 18, 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 September 30, 2019.

The Company reported net income of $12.7 million, or $0.25 per diluted share, for the quarter ended September 30, 2019, compared to a net loss for the quarter ended June 30, 2019 ("linked quarter") of $3.2 million, or $0.06 per diluted share. The net loss for the linked quarter was primarily due to an impairment charge recorded on the Company's investments in D.C. Solar LLCs of $6.3 million (after tax) and the related establishment of an additional tax reserve of $8.7 million during the three months ended June 30, 2019.  The Company reported net income of $16.3 million, or $0.32 per diluted share, for the quarter ended September 30, 2018.

On July 15, 2019, United Financial and People's United Financial, Inc. announced the signing of a definitive agreement and plan of merger pursuant to which United Financial will merge with and into People's United Financial, Inc., with People's United Financial, Inc. surviving the merger, in an all stock transaction valued at approximately $759.0 million as of July 15, 2019. Consummation of the merger is expected to be effective on November 1, 2019, subject to receipt of the requisite approval by United Financial’s shareholders and satisfaction of other customary closing conditions. A special meeting of United Financial’s shareholders to consider and vote upon the approval of the merger and related matters is scheduled to be held on October 22, 2019.

Balance Sheet

Assets totaled $7.18 billion at September 30, 2019, representing a decrease of $155.9 million, or 2.1%, from $7.34 billion at June 30, 2019. At September 30, 2019, total available for sale securities were $823.2 million, representing a decrease of $17.3 million, or 2.1%, from the linked quarter. The overall decrease was primarily due to sales of lower yielding, higher risk weighted securities, offset by purchases of various mortgage-backed securities and corporate bonds. At September 30, 2019, total loans were $5.68 billion, representing a decrease of $79.9 million, or 1.4%, from the linked quarter. Changes to loan balances during the third quarter of 2019 were highlighted by a $74.0 million, or 8.1%, decrease in commercial business loans, a $22.3 million, or 3.9%, decrease in home equity loans, a $7.4 million, or 58.7%, decrease in residential construction loans, a $6.5 million, or 0.3%, decrease in investor non-owner occupied commercial real estate loans, a $5.6 million, or 0.4%, decrease in residential real estate loans and a $2.0 million, or 0.4%, decrease in owner-occupied commercial real estate loans from the linked quarter.  Slightly offsetting the decreased loan balances above were a $26.8 million, or 6.1%, increase in other consumer loans and an $11.1 million, or 13.8%, increase in commercial construction loans.  Loans held for sale decreased $27.7 million, or 71.4%, from the linked quarter due to a change in pipeline delivery terms. Total cash and cash equivalents decreased $12.3 million, or 10.7%, from the linked quarter as the Company utilized excess cash to pay off maturing Federal Home Loan Bank advances.

Deposits totaled $5.65 billion at September 30, 2019 and decreased by $74.5 million, or 1.3%, from $5.73 billion at June 30, 2019. Decreases in deposit balances during the third quarter of 2019 were primarily due to a $116.2 million, or 6.4%, decrease in certificates of deposit balances, a $20.8 million, or 4.3%, decrease in regular savings accounts and a $5.0 million, or 0.6%, decrease in non-interest bearing checking deposits.  Offsetting these decreases was a $48.6 million, or 5.4%, increase in NOW checking account balances and an $18.7 million, or 1.1%, increase in money market account balances in the third quarter.

Total Federal Home Loan Bank advances decreased by $98.2 million, or 15.1%, over the linked quarter as the Company utilized excess cash generated from proceeds from loan and security cash flows to pay off maturing advances as noted above.

Investment in D.C. Solar Tax-Advantaged Funds

The Company continues to monitor developments in its investments in Solar Eclipse Investment Fund X, LLC, Solar Eclipse Investment Fund XV, LLC, and Solar Eclipse Investment Fund XXII, LLC ("LLC investments"), all of which are borrowers of and lessees to D.C. Solar Solutions, Inc. and D.C. Solar Distribution, Inc., respectively. In late January and early February 2019, D.C Solar Solutions, Inc., D.C. Solar Distribution, Inc. and several affiliated companies filed for Chapter 11 bankruptcy. On March 22, 2019, all cases were converted to cases under Chapter 7 of the Bankruptcy Code.

During the linked quarter, the Company recorded an impairment charge to the investment in the LLCs of $6.3 million (after tax) and an additional tax reserve of $8.7 million to reflect the loss and the associated uncertain tax positions.  The net impact to net income for the linked quarter was $15.0 million.  There was no additional measurable loss identified during the three months ended September 30, 2019. Given the facts and circumstances that we are aware of at the time of the issuance of this release, the Company does not believe a full loss or total tax benefit reversal to be likely.

Net Interest Income

Net interest income decreased by $604,000, or 1.3%, on a linked quarter basis, to $46.4 million, primarily attributable to a decrease in interest and dividend income of  $900,000, or 1.2%, to $72.5 million, being partially offset by a decrease in interest expense of $296,000, or 1.1%, to $26.1 million. Average interest-earning assets decreased by $26.2 million, or 0.4%, on a linked quarter basis, primarily due to a $20.4 million, or 33.8%, decrease in average other earning asset balances, as well as a $3.1 million, or 9.0%,  decrease in average FHLB stock and a $2.7 million, or 0.3%, decrease in average investments as a result of sales of lower yielding, higher risk weighted securities.

Interest expense decreased by $296,000, or 1.1%, to $26.1 million during the third quarter of 2019, from $26.4 million in the linked quarter. Average interest-bearing deposit balances increased by $10.2 million, or 0.2%, on a linked quarter basis, primarily driven by a $93.0 million, or 3.7%, increase in average NOW and money market account balances, offset by a $61.3 million, or 3.3%, decrease in average certificates of deposit and a $21.5 million, or 4.3%, decrease in average savings account balances. Average non-interest bearing deposits increased by $14.0 million, or 1.8%, as compared to the linked quarter. Average Federal Home Loan Bank advances decreased by $85.5 million, or 12.3%.

The tax-equivalent net interest margin decreased by 5 basis points to 2.77% in the third quarter of 2019, from 2.82% in the linked period. The decrease in the tax-equivalent net interest margin was driven by a 7 basis point decrease in the yield of interest-earning assets slightly offset by a 1 basis point decrease in the cost of interest-bearing liabilities. The interest-earning asset yield decline was largely driven by a 25 basis point decrease in the yield on commercial business loans, a 12 basis point decrease in the yield on commercial real estate loans and a 6 basis point decrease in the yield on home equity loans.  In addition, there was a 37 basis point decrease in the yield on Federal Home Loan Bank Stock and a 15 basis point decrease in the yield on investment securities. These decreases were offset by an 11 basis point increase in the yield on residential real estate loans, an 8 basis point increase in the yield on construction loans, a 5 basis point increase in the yield on other earning assets and a 2 basis point increase in the yield on other consumer loans. The total cost of funds remained unchanged at 1.64% as compared to the linked quarter.

Provision for Loan Losses

The provision for loan losses totaled $2.0 million for the quarter ended September 30, 2019 as compared to $2.5 million for the linked quarter. Net charge-offs for the quarter ended September 30, 2019 totaled $1.5 million, or 0.10%, 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 June 30, 2019. 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 increased by $8.3 million to $9.2 million for the quarter ended September 30, 2019 from $840,000 in the linked quarter. The increase in the third quarter's non-interest income was driven primarily by a $7.7 million decrease in net loss on limited partnership investments as compared to the linked quarter, due mainly to the $7.8 million impairment charge on the D.C. Solar LLC investments recorded in the linked quarter as discussed above. There was no similar impairment recorded during the quarter ended September 30, 2019.  Other increases included a $933,000, or 227.6%, increase in income from mortgage banking activities and an increase of $493,000, or 32.4%, in bank-owned life insurance income as compared to the linked quarter.  These increases were offset by a decrease of $922,000, or 12.2%, in service charges and fee income primarily resulting from lower swap fee income as compared to the linked quarter.

Non-Interest Expense

Non-interest expense for the quarter ended September 30, 2019 totaled $38.6 million and decreased by $903,000, or 2.3%, from the linked quarter. The decrease in non-interest expense during the quarter was driven by an $832,000, or 108.2%, decrease in FDIC insurance assessment expense due to receipt of FDIC credits, a $378,000, or 1.7%, decrease in salaries and employee benefits expense and a $302,000, or 5.1%, decrease in other non-interest expense.  These decreases were offset by a $543,000, or 22.5%, increase in professional fees largely due to legal expenses pertaining to the proposed acquisition by People's United Financial, Inc. as compared to the linked quarter.

Provision for Income Taxes

The provision for income taxes was $2.3 million for the quarter ended September 30, 2019 as compared to $9.2 million in the linked quarter.  The effective tax rate was 15.0% at September 30, 2019 as compared to 154.9% at June 30, 2019.  The effective tax rate is lower compared to the linked quarter due to the recognition of uncertain tax positions of $8.7 million associated with D.C. Solar LLC investments during the linked quarter as discussed above.

Asset Quality

Asset quality remained strong and stable for the period, with non-performing assets decreasing by $1.3 million to $30.7 million at September 30, 2019 from $32.0 million at June 30, 2019. The ratio of non-performing assets to total assets for the quarter ended September 30, 2019 was 0.43%, as compared to 0.44% in the linked quarter.

Capital

The Company reported Tangible Common Equity ("TCE") of $608.7 million, or 8.4% of average assets, for the quarter ended September 30, 2019. Tangible book value per share increased to $11.90 at September 30, 2019 from $11.71 at June 30, 2019. The increase was primarily driven by the impact of the Company's net income of $12.7 million and an increase in accumulated other comprehensive income as a result of an increase in the market value of the Company’s investment portfolio as compared to the previous quarter, offset by the cash dividend payment to shareholders of $0.12 per share during the quarter. Book value per share at September 30, 2019 was $14.27, as compared to $14.09 in the linked quarter.

Dividend

On October 9, 2019, the Board of Directors of United Financial Bancorp, Inc. declared a cash dividend of $0.12 per share to shareholders of record at the close of business on October 21, 2019, payable on October 23, 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 September 30, 2019, the Company had $7.18 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 contains certain forward-looking statements about the Company. Forward-looking statements include statements regarding anticipated future events, such as the anticipated effect of the Company's LLC investments and the proposed merger with People's United Financial, Inc., 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 the outcome of the D.C. Solar bankruptcy, delays or difficulties in obtaining the requisite approvals for the merger with People's United Financial, Inc., 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
Consolidated Statements of Net Income
(Unaudited)

  For the Three Months Ended
September 30,
 For the Nine Months Ended
September 30,
  2019 2018 2019 2018
   
Interest and dividend income: (In thousands, except share data)
Loans $65,255  $61,061  $195,669  $173,799 
Securities-taxable interest 5,823  5,822  18,415  17,289 
Securities-non-taxable interest 623  2,347  2,361  7,130 
Securities-dividends 572  748  1,881  2,121 
Interest-bearing deposits 232  213  798  476 
Total interest and dividend income 72,505  70,191  219,124  200,815 
Interest expense:        
Deposits 20,740  15,767  61,235  39,658 
Borrowed funds 5,359  5,995  17,536  18,004 
Total interest expense 26,099  21,762  78,771  57,662 
Net interest income 46,406  48,429  140,353  143,153 
Provision for loan losses 2,037  2,007  6,552  6,296 
Net interest income after provision for loan losses 44,369  46,422  133,801  136,857 
Non-interest income:        
Service charges and fees 6,616  6,623  20,339  19,324 
Net gain (loss) from sales of securities 107  (58) 981  120 
Income from mortgage banking activities 523  1,486  704  4,061 
Bank-owned life insurance income 2,014  1,460  5,481  4,777 
Net loss on limited partnership investments (244) (221) (8,745) (1,771)
Other income 149  265  225  693 
Total non-interest income 9,165  9,555  18,985  27,204 
Non-interest expense:        
Salaries and employee benefits 21,545  22,643  65,670  65,954 
Service bureau fees 2,360  2,209  6,595  6,592 
Occupancy and equipment 5,136  4,487  15,787  14,104 
Professional fees 2,957  1,013  6,664  3,282 
Marketing and promotions 677  1,119  2,317  2,993 
FDIC insurance assessments (63) 655  1,365  2,129 
Core deposit intangible amortization 372  288  1,179  930 
Other 5,570  6,529  17,621  18,065 
Total non-interest expense 38,554  38,943  117,198  114,049 
Income before income taxes 14,980  17,034  35,588  50,012 
Provision for income taxes 2,250  726  13,449  2,271 
Net income $12,730  $16,308  $22,139  $47,741 
         
Net income per share:        
Basic $0.25  $0.32  $0.44  $0.94 
Diluted $0.25  $0.32  $0.44  $0.94 
Weighted-average shares outstanding:        
Basic 50,651,762  50,624,832  50,629,153  50,535,569 
Diluted 50,813,908  51,104,776  50,780,547  51,026,105 


United Financial Bancorp, Inc. and Subsidiaries
Consolidated Statements of Net Income
(Unaudited)

  For the Three Months Ended
  September 30,
2019
 June 30,
2019
 March 31,
2019
 December 31,
2018
 September 30,
2018
   
Interest and dividend income: (In thousands, except share data)
Loans $65,255  $65,650  $64,764  $63,227  $61,061 
Securities-taxable interest 5,823  6,117  6,475  5,705  5,822 
Securities-non-taxable interest 623  644  1,094  2,339  2,347 
Securities-dividends 572  653  656  702  748 
Interest-bearing deposits 232  341  225  250  213 
Total interest and dividend income 72,505  73,405  73,214  72,223  70,191 
Interest expense:          
Deposits 20,740  20,564  19,931  18,183  15,767 
Borrowed funds 5,359  5,831  6,346  5,678  5,995 
Total interest expense 26,099  26,395  26,277  23,861  21,762 
Net interest income 46,406  47,010  46,937  48,362  48,429 
Provision for loan losses 2,037  2,472  2,043  2,618  2,007 
Net interest income after provision for loan losses 44,369  44,538  44,894  45,744  46,422 
Non-interest income:          
Service charges and fees 6,616  7,538  6,185  7,447  6,623 
Net gain (loss) from sales of securities 107  137  737  25  (58)
Income (loss) from mortgage banking activities 523  (410) 591  698  1,486 
Bank-owned life insurance income 2,014  1,521  1,946  1,517  1,460 
Net loss on limited partnership investments (244) (7,898) (603) (405) (221)
Other income (loss) 149  (48) 124  211  265 
Total non-interest income 9,165  840  8,980  9,493  9,555 
Non-interest expense:          
Salaries and employee benefits 21,545  21,923  22,202  25,341  22,643 
Service bureau fees 2,360  2,198  2,037  2,309  2,209 
Occupancy and equipment 5,136  5,111  5,540  6,384  4,487 
Professional fees 2,957  2,414  1,293  1,136  1,013 
Marketing and promotions 677  782  858  1,108  1,119 
FDIC insurance assessments (63) 769  659  611  655 
Core deposit intangible amortization 372  388  420  420  288 
Other 5,570  5,872  6,178  6,409  6,529 
Total non-interest expense 38,554  39,457  39,187  43,718  38,943 
Income before income taxes 14,980  5,921  14,687  11,519  17,034 
Provision (benefit) for income taxes 2,250  9,169  2,030  (646) 726 
Net income (loss) $12,730  $(3,248) $12,657  $12,165  $16,308 
           
Net income (loss) per share:          
Basic $0.25  $(0.06) $0.25  $0.24  $0.32 
Diluted $0.25  $(0.06) $0.25  $0.24  $0.32 
Weighted-average shares outstanding:          
Basic 50,651,762  50,620,236  50,615,059  50,613,498  50,624,832 
Diluted 50,813,908  50,620,236  50,907,092  50,970,000  51,104,776 


United Financial Bancorp, Inc. and Subsidiaries
Consolidated Statements of Condition
(Unaudited)

  September 30,
2019
 June 30,
2019
 March 31,
2019
 December 31,
2018
 September 30,
2018
   
ASSETS (In thousands)
Cash and cash equivalents:          
Cash and due from banks $66,727  $67,939  $50,823  $36,434  $48,786 
Short-term investments 35,731  46,807  104,350  61,530  29,809 
Total cash and cash equivalents 102,458  114,746  155,173  97,964  78,595 
Available for sale securities – At fair value 823,247  840,500  848,541  973,347  972,035 
Loans held for sale 11,108  38,809  16,172  78,788  86,948 
Loans:          
Commercial real estate loans:          
Owner-occupied 457,601  459,648  439,366  443,398  434,906 
Investor non-owner occupied 1,964,650  1,971,103  1,932,137  1,911,070  1,888,848 
Construction 91,143  80,063  94,649  87,493  78,235 
Total commercial real estate loans 2,513,394  2,510,814  2,466,152  2,441,961  2,401,989 
Commercial business loans 836,476  910,473  920,165  886,770  861,030 
Consumer loans:          
Residential real estate 1,300,676  1,306,208  1,322,423  1,313,373  1,283,126 
Home equity 553,349  575,683  583,368  583,454  579,907 
Residential construction 5,183  12,542  13,620  20,632  32,750 
Other consumer 466,204  439,413  425,854  410,249  369,781 
Total consumer loans 2,325,412  2,333,846  2,345,265  2,327,708  2,265,564 
Total loans 5,675,282  5,755,133  5,731,582  5,656,439  5,528,583 
Net deferred loan costs and premiums 17,002  17,965  17,901  17,786  16,603 
Allowance for loan losses (53,751) (53,206) (52,041) (51,636) (49,909)
Loans receivable - net 5,638,533  5,719,892  5,697,442  5,622,589  5,495,277 
Federal Home Loan Bank of Boston stock, at cost 29,421  34,335  37,702  41,407  42,032 
Accrued interest receivable 23,930  24,938  25,061  24,823  25,485 
Deferred tax asset, net 25,561  27,366  27,600  32,706  31,473 
Premises and equipment, net 60,748  62,304  63,863  68,657  67,612 
Operating lease right-of-use assets 42,079  43,171  44,377     
Financing lease right-of-use assets 4,177  4,266  4,356     
Goodwill 116,709  116,709  116,727  116,769  115,281 
Core deposit intangible asset 4,847  5,219  5,607  6,027  3,561 
Cash surrender value of bank-owned life insurance 196,239  195,993  194,496  193,429  181,928 
Other assets 100,999  107,707  102,823  100,368  107,271 
Total assets $7,180,056  $7,335,955  $7,339,940  $7,356,874  $7,207,498 
           
           
  September 30,
2019
 June 30,
2019
 March 31,
2019
 December 31,
2018
 September 30,
2018
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Liabilities:          
Deposits:          
Non-interest-bearing $838,913  $843,926  $777,969  $799,785  $759,210 
Interest-bearing 4,813,137  4,882,622  4,886,283  4,870,814  4,741,153 
Total deposits 5,652,050  5,726,548  5,664,252  5,670,599  5,500,363 
Mortgagors’ and investor escrow accounts 7,498  14,541  11,510  4,685  9,597 
Federal Home Loan Bank advances and other borrowings 643,501  741,989  826,668  899,626  926,592 
Operating lease liabilities 54,163  55,197  56,265     
Financing lease liabilities 4,450  4,518  4,585     
Accrued expenses and other liabilities 88,112  73,140  52,562  69,446  61,128 
Total liabilities 6,449,774  6,615,933  6,615,842  6,644,356  6,497,680 
Total stockholders’ equity 730,282  720,022  724,098  712,518  709,818 
Total liabilities and stockholders’ equity $7,180,056  $7,335,955  $7,339,940  $7,356,874  $7,207,498 
                     



United Financial Bancorp, Inc. and Subsidiaries
Selected Financial Highlights
(Dollars In Thousands, Except Share Data)
(Unaudited)

 At or For the Three Months Ended
 September 30,
 2019
 June 30,
 2019
 March 31,
 2019
 December 31,
 2018
 September 30,
 2018
Share Data:         
Basic net income (loss) per share$0.25  $(0.06) $0.25  $0.24  $0.32 
Diluted net income (loss) per share0.25  (0.06) 0.25  0.24  0.32 
Dividends declared per share0.12  0.12  0.12  0.12  0.12 
Tangible book value per share$11.90  $11.71  $11.78  $11.54  $11.55 
Key Statistics:         
Total revenue$55,571  $47,850  $55,917  $57,855  $57,984 
Total non-interest expense38,554  39,457  39,187  43,718  38,943 
Average earning assets6,680,059  6,706,237  6,783,604  6,708,701  6,671,424 
Key Ratios:         
Return (loss) on average assets (annualized)0.70% (0.18%) 0.69% 0.67% 0.91%
Return (loss) on average equity (annualized)7.05% (1.79%) 7.13% 6.89% 9.26%
Tax-equivalent net interest margin (annualized)2.77% 2.82% 2.81% 2.90% 2.92%
Non-interest expense to average assets (annualized)2.13% 2.16% 2.13% 2.41% 2.17%
Cost of funds (annualized) (1)1.64% 1.64% 1.61% 1.48% 1.36%
Total revenue growth rate16.14% (14.43%) (3.35%) (0.22)% 2.55%
Total revenue growth rate (annualized)64.54% (57.71%) (13.40%) (0.89)% 10.21%
Average earning asset growth rate(0.39%) (1.14%) 1.12% 0.56% 1.31%
Average earning asset growth rate (annualized)(1.56%) (4.56%) 4.47% 2.24% 5.25%
Residential Mortgage Production:         
Dollar volume (total)$62,878  $46,549  $31,882  $128,209  $143,673 
Mortgages originated for purchases31,241  24,409  21,434  101,266  111,555 
Loans sold68,031  22,352  89,980  108,663  99,372 
Income (loss) from mortgage banking activities523  (410) 591  698  1,486 
Non-performing Assets:         
Residential real estate$13,015  $12,893  $13,742  $13,217  $11,949 
Home equity4,890  5,051  4,577  4,735  4,005 
Investor-owned commercial real estate1,928  2,357  739  1,131  1,525 
Owner-occupied commercial real estate1,408  1,989  1,830  2,450  1,202 
Construction  137  171  199  243 
Commercial business1,660  1,666  1,627  944  985 
Other consumer1,143  657  1,034  1,030  597 
Non-accrual loans24,044  24,750  23,720  23,706  20,506 
Troubled debt restructured – non-accruing5,309  5,820  5,479  6,971  6,706 
Total non-performing loans29,353  30,570  29,199  30,677  27,212 
Other real estate owned1,347  1,455  1,429  1,389  1,808 
Total non-performing assets$30,700  $32,025  $30,628  $32,066  $29,020 
Non-performing loans to total loans0.52% 0.53% 0.51% 0.54% 0.49%
Non-performing assets to total assets0.43% 0.44% 0.42% 0.44% 0.40%
Allowance for loan losses to non-performing loans183.12% 174.05% 178.23% 168.32% 183.41%
Allowance for loan losses to total loans0.95% 0.92% 0.91% 0.91% 0.90%
Non-GAAP Ratios: (2)         
Efficiency ratio65.33% 69.99% 69.67% 69.18% 65.61%
Return (loss) on average tangible common equity (annualized)8.68% (1.94%) 8.85% 8.55% 11.30%
Pre-provision net revenue to average assets1.06% 0.92% 0.92% 1.00% 1.12%

(1) The cost of funds ratio represents interest incurred on liabilities as a percentage of average non-interest-bearing deposits and interest-bearing liabilities.
(2) 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. Calculations of these non-GAAP metrics are provided after the reconciliations of non-GAAP financial measures and appear on pages F-11 and F-12.


United Financial Bancorp, Inc. and Subsidiaries
Average Balance Sheets, Interest and Yields/Costs
(Dollars In Thousands)
(Unaudited)

 For the Three Months Ended
 September 30, 2019 September 30, 2018
 Average
Balance
 Interest
and
Dividends
 Yield/Cost Average
Balance
 Interest
and
Dividends
 Yield/Cost
Interest-earning assets:           
Residential real estate$1,353,068  $12,939  3.82% $1,375,948  $12,451  3.65%
Commercial real estate2,430,138  27,662  4.45  2,320,375  26,105  4.40 
Construction93,461  1,260  5.27  114,068  1,379  4.73 
Commercial business874,423  10,532  4.71  841,936  9,428  4.38 
Home equity561,172  7,561  5.35  584,706  7,471  5.07 
Other consumer451,562  5,800  5.10  351,892  4,532  5.11 
Investment securities843,963  6,604  3.11  995,405  8,686  3.48 
Federal Home Loan Bank stock32,310  534  6.61  45,016  715  6.35 
Other earning assets39,962  236  2.34  42,078  216  2.04 
Total interest-earning assets6,680,059  73,128  4.32  6,671,424  70,983  4.21 
Allowance for loan losses(53,741)     (49,823)    
Non-interest-earning assets629,146      569,471     
Total assets$7,255,464      $7,191,072     
Interest-bearing liabilities:           
NOW and money market$2,610,253  $10,511  1.60% $2,515,660  $8,461  1.33%
Savings482,639  75  0.06  501,700  75  0.06 
Certificates of deposit1,769,455  10,154  2.28  1,691,382  7,231  1.70 
Total interest-bearing deposits4,862,347  20,740  1.69  4,708,742  15,767  1.33 
Federal Home Loan Bank advances608,551  4,074  2.62  844,207  4,591  2.13 
Other borrowings87,707  1,285  5.73  111,760  1,404  4.92 
Total interest-bearing liabilities5,558,605  26,099  1.86  5,664,709  21,762  1.52 
Non-interest-bearing deposits810,523      750,503     
Other liabilities163,994      71,554     
Total liabilities6,533,122      6,486,766     
Stockholders’ equity722,342      704,306     
Total liabilities and stockholders’ equity$7,255,464      $7,191,072     
Net interest-earning assets$1,121,454      $1,006,715     
Tax-equivalent net interest income  47,029      49,221   
Tax-equivalent net interest rate spread (1)    2.46%     2.69%
Tax-equivalent net interest margin (2)    2.77%     2.92%
Average interest-earning assets to average interest-bearing liabilities    120.18%     117.77%
Less tax-equivalent adjustment  623      792   
Net interest income  $46,406      $48,429   
                

(1)  Tax-equivalent net interest rate spread represents the difference between the 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
Average Balance Sheets, Interest and Yields/Costs
(Dollars In Thousands)
(Unaudited)

 For the Three Months Ended
 September 30, 2019 June 30, 2019
 Average
Balance
 Interest
and
Dividends
 Yield/Cost Average
Balance
 Interest
and
Dividends
 Yield/Cost
Interest-earning assets:           
Residential real estate$1,353,068  $12,939  3.82% $1,351,571  $12,520  3.71%
Commercial real estate2,430,138  27,662  4.45  2,379,330  27,503  4.57 
Construction93,461  1,260  5.27  105,801  1,387  5.19 
Commercial business874,423  10,532  4.71  916,928  11,487  4.96 
Home equity561,172  7,561  5.35  576,046  7,771  5.41 
Other consumer451,562  5,800  5.10  433,971  5,496  5.08 
Investment securities843,963  6,604  3.11  846,711  6,921  3.26 
Federal Home Loan Bank stock32,310  534  6.61  35,513  620  6.98 
Other earning assets39,962  236  2.34  60,366  344  2.29 
Total interest-earning assets6,680,059  73,128  4.32  6,706,237  74,049  4.39 
Allowance for loan losses(53,741)     (52,680)    
Non-interest-earning assets629,146      636,544     
Total assets$7,255,464      $7,290,101     
Interest-bearing liabilities:           
NOW and money market$2,610,253  $10,511  1.60% $2,517,212  $10,267  1.64%
Savings482,639  75  0.06  504,186  81  0.06 
Certificates of deposit1,769,455  10,154  2.28  1,830,763  10,215  2.24 
Total interest-bearing deposits4,862,347  20,740  1.69  4,852,161  20,563  1.70 
Federal Home Loan Bank advances608,551  4,074  2.62  694,082  4,542  2.59 
Other borrowings87,707  1,285  5.73  87,875  1,290  5.81 
Total interest-bearing liabilities5,558,605  26,099  1.86  5,634,118  26,395  1.87 
Non-interest-bearing deposits810,523      796,504     
Other liabilities163,994      134,924     
Total liabilities6,533,122      6,565,546     
Stockholders’ equity722,342      724,555     
Total liabilities and stockholders’ equity$7,255,464      $7,290,101     
Net interest-earning assets$1,121,454      $1,072,119     
Tax-equivalent net interest income  47,029      47,654   
Tax-equivalent net interest rate spread (1)    2.46%     2.52%
Tax-equivalent net interest margin (2)    2.77%     2.82%
Average interest-earning assets to average interest-bearing liabilities    120.18%     119.03%
Less tax-equivalent adjustment  623      644   
Net interest income  $46,406      $47,010   
                

(1)  Tax-equivalent net interest rate spread represents the difference between the 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
Average Balance Sheets, Interest and Yields/Costs
(Dollars In Thousands)
(Unaudited)

 For the Nine Months Ended
 September 30, 2019 September 30, 2018
 Average
Balance
 Interest
and
Dividends
 Yield/Cost Average
Balance
 Interest
and
Dividends
 Yield/Cost
Interest-earning assets:           
Residential real estate$1,361,721  $38,345  3.75% $1,342,955  $35,977  3.59%
Commercial real estate2,389,734  82,467  4.55  2,303,188  74,522  4.27 
Construction103,422  4,073  5.19  116,144  4,035  4.58 
Commercial business893,211  32,632  4.82  833,612  26,949  4.26 
Home equity573,056  23,206  5.41  583,876  21,056  4.82 
Other consumer434,652  16,470  5.07  324,802  12,394  5.10 
Investment securities885,389  21,344  3.21  1,018,609  26,305  3.44 
Federal Home Loan Bank stock36,069  1,781  6.59  48,513  2,024  5.56 
Other earning assets45,667  808  2.37  36,856  487  1.77 
Total interest-earning assets6,722,921  221,126  4.36  6,608,555  203,749  4.09 
Allowance for loan losses(52,842)     (48,750)    
Non-interest-earning assets635,164      559,792     
Total assets$7,305,243      $7,119,597     
Interest-bearing liabilities:           
NOW and money market$2,565,190  $31,089  1.62% $2,307,660  $19,517  1.13%
Savings495,599  230  0.06  510,137  225  0.06 
Certificates of deposit1,807,829  29,916  2.21  1,745,332  19,916  1.53 
Total interest-bearing deposits4,868,618  61,235  1.68  4,563,129  39,658  1.16 
Federal Home Loan Bank advances700,461  13,660  2.57  945,085  13,829  1.93 
Other borrowings88,109  3,876  5.80  113,937  4,175  4.83 
Total interest-bearing liabilities5,657,188  78,771  1.86  5,622,151  57,662  1.37 
Non-interest-bearing deposits784,334       734,253      
Other liabilities144,741       66,491      
Total liabilities6,586,263       6,422,895      
Stockholders’ equity718,980       696,702      
Total liabilities and stockholders’ equity$7,305,243       $7,119,597      
Net interest-earning assets$1,065,733       $986,404      
Tax-equivalent net interest income  142,355       146,087    
Tax-equivalent net interest rate spread (1)    2.50%     2.72%
Tax-equivalent net interest margin (2)    2.80%     2.93%
Average interest-earning assets to average interest-bearing liabilities    118.84%     117.54%
Less tax-equivalent adjustment  2,002      2,934   
Net interest income  $140,353      $143,153   
                

(1)  Tax-equivalent net interest rate spread represents the difference between the 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:

 Three Months Ended
 September 30,
 2019
 June 30,
 2019
 March 31,
 2019
 December 31,
 2018
 September 30,
 2018
  
 (Dollars in thousands)
Net Income (Loss) (GAAP)$12,730  $(3,248) $12,657  $12,165  $16,308 
Non-GAAP adjustments:         
Non-interest income(638) (137) (1,158) (25) 58 
Non-interest expense1,932  570    2,677  (129)
Income tax benefit related to tax reform      (1,717)  
Related income tax expense (benefit)(116) 29  155  (557) 15 
Net adjustment1,178  462  (1,003) 378  (56)
Total net income (loss) (non-GAAP)$13,908  $(2,786) $11,654  $12,543  $16,252 
          
Non-interest income (GAAP)$9,165  $840  $8,980  $9,493  $9,555 
Non-GAAP adjustments:         
Net (gain) loss on sales of securities(107) (137) (737) (25) 58 
BOLI claim benefit(531)   (421)    
Net adjustment(638) (137) (1,158) (25) 58 
Total non-interest income (non-GAAP)8,527  703  7,822  9,468  9,613 
Total net interest income46,406  47,010  46,937  48,362  48,429 
Total revenue (non-GAAP)$54,933  $47,713  $54,759  $57,830  $58,042 
          
Non-interest expense (GAAP)$38,554  $39,457  $39,187  $43,718  $38,943 
Non-GAAP adjustments:         
Merger related expense(1,932) (570)      
Lease exit/disposal cost obligation      (466) 129 
Effect of position eliminations      (2,211)  
Net adjustment(1,932) (570)   (2,677) 129 
Total non-interest expense (non-GAAP)$36,622  $38,887  $39,187  $41,041  $39,072 
          
Total loans$5,675,282  $5,755,133  $5,731,582  $5,656,439  $5,528,583 
Non-covered loans (1)(585,555) (618,176) (658,455) (675,112) (708,621)
Total covered loans$5,089,727  $5,136,957  $5,073,127  $4,981,327  $4,819,962 
Allowance for loan losses$53,751  $53,206  $52,041  $51,636  $49,909 
Allowance for loan losses to total loans0.95% 0.92% 0.91% 0.91% 0.90%
Allowance for loan losses to total covered loans1.06% 1.04% 1.03% 1.04% 1.04%

(1) Represents acquired loans that were recorded at fair value. These loans carry no allowance for loan losses for the periods reflected above.

          
 Three Months Ended
 September 30,
 2019
 June 30,
 2019
 March 31,
 2019
 December 31,
 2018
 September 30,
 2018
                    
Efficiency Ratio:         
Non-Interest Expense (GAAP)$38,554  $39,457  $39,187  $43,718  $38,943 
Non-GAAP adjustments:         
Other real estate owned expense(170) (83) (105) (108) (256)
Merger related expense(1,932) (570)      
Lease exit/disposal cost obligation      (466) 129 
Effect of position eliminations      (2,211)  
Non-Interest Expense for Efficiency Ratio (non-GAAP)$36,452  $38,804  $39,082  $40,933  $38,816 
          
Net Interest Income (GAAP)$46,406  $47,010  $46,937  $48,362  $48,429 
Non-GAAP adjustments:         
Tax-equivalent adjustment for tax-exempt loans and investment securities623  644  736  938  895 
          
Non-Interest Income (GAAP)9,165  840  8,980  9,493  9,555 
Non-GAAP adjustments:         
Net (gain) loss on sales of securities(107) (137) (737) (25) 58 
Net loss on limited partnership investments244  7,898  603  405  221 
BOLI claim benefit(531)   (421)    
Total Revenue for Efficiency Ratio (non-GAAP)$55,800  $56,255  $56,098  $59,173  $59,158 
          
Efficiency Ratio (Non-Interest Expense for Efficiency Ratio (non-GAAP)/Total Revenue for Efficiency Ratio (non-GAAP))65.33% 68.98% 69.67% 69.18% 65.61%
          
          
 Three Months Ended
 September 30,
 2019
 June 30,
 2019
 March 31,
 2019
 December 31,
 2018
 September 30,
 2018
                    
Pre-Provision Net Revenue ("PPNR") to Average Assets (Annualized):    
Net Interest Income (GAAP)$46,406  $47,010  $46,937  $48,362  $48,429 
Non-GAAP adjustments:         
Tax-equivalent adjustment for tax-exempt loans and investment securities623  644  736  938  895 
Total tax-equivalent net interest income (A)$47,029  $47,654  $47,673  $49,300  $49,324 
          
Non-Interest Income (GAAP)9,165  840  8,980  9,493  9,555 
Non-GAAP adjustments:         
Net (gain) loss on sales of securities(107) (137) (737) (25) 58 
Net loss on limited partnership investments244  7,898  603  405  221 
BOLI claim benefit(531)   (421)    
Non-Interest Income for PPNR (non-GAAP) (B)$8,771  $8,601  $8,425  $9,873  $9,834 
          
Non-Interest Expense (GAAP)$38,554  $39,457  $39,187  $43,718  $38,943 
Non-GAAP adjustments:         
Merger related expense(1,932) (570)      
Lease exit/disposal cost obligation      (466) 129 
Effect of position eliminations      (2,211)  
Non-Interest Expense for PPNR (non-GAAP) (C)$36,622  $38,887  $39,187  $41,041  $39,072 
          
Total PPNR (non-GAAP)  (A + B - C) :$19,178  $17,368  $16,911  $18,132  $20,086 
Average Assets7,255,464  7,290,101  7,371,438  7,244,396  7,191,072 
PPNR to Average Assets (Annualized)1.06% 0.95% 0.92% 1.00% 1.12%
                    
Return on Average Tangible Common Equity (Annualized):                   
Net Income (Loss) (GAAP)$12,730  $(3,248) $12,657  $12,165  $16,308 
Non-GAAP adjustments:                   
Intangible assets amortization, tax effected at 21%294  307  332  332  228 
Net Income (Loss) excluding intangible assets amortization, tax effected at 21%$13,024  $(2,941) $12,989  $12,497  $16,536 
Average stockholders' equity (non-GAAP)$722,342  $724,555  $709,905  $706,124  $704,306 
Average goodwill & other intangible assets (non-GAAP)122,132  119,287  122,597  121,614  119,009 
Average tangible common stockholders' equity (non-GAAP)$600,210  $605,268  $587,308  $584,510  $585,297 
Return (Loss) on Average Tangible Common Equity (non-GAAP)8.68% (1.94)% 8.85% 8.55% 11.30%


Investor Relations Contact: Media Relations Contact:
Marliese L. Shaw
 Adam J. Jeamel
Executive Vice President, Investor Relations Officer Regional President, Corporate Communications
United Bank United Bank
860-291-3622 860-291-3765
[email protected]  [email protected] 

United Financial Bancorp, Inc.

Source: United Financial Bancorp, Inc.