Stock Buyback Plan: United Financial Bancorp, Inc. ("United Financial" or the "Company") (Nasdaq:UBNK), the holding company for United Bank (the "Bank"), announced on May 23, 2013 that it completed the remaining authorized repurchases under its first stock purchase program, which had approximately 342,000 shares available for repurchase when the Company announced the approval of a new program earlier that week.
Employee Stock Ownership Plan: As part of the reorganization and stock offering
completed in 2005, the Company established an ESOP for eligible employees of the
Bank, and authorized the Company to lend funds to the ESOP to purchase 699,659 or
3.6% of the shares issued in the initial public offering. Upon completion of the
2005 reorganization, the ESOP borrowed $4.4 million from the Company to purchase
437,287 shares of common stock. Additional shares of 59,300 and 203,072 were subsequently
purchased by the ESOP in the open market at a total cost of $817,000 and $2.7 million
in 2006 and 2005, respectively, with additional funds borrowed from the Company.
The interest rate for the ESOP loan is the prime rate plus one percent, or 4.25%
as of December 31, 2012. As the loan is repaid to the Company, shares will be released
from collateral and will be allocated to the accounts of the participants. As of
December 31, 2012, the outstanding balance for the loan was $1.9 million. Principal
payments of $6.0 million have been made on the loan since inception.
The first stock buyback plan was initiated in March 2012 when the Company reached the one year anniversary of its March 3, 2011 stock conversion. Under this plan, the Company was authorized to repurchase up to 2,951,250 shares, or 10% of the outstanding shares at the time the plan was approved. As of May 20, 2013, the Company had repurchased all of the shares authorized in the program at an average cost of $12.36 per share. The average closing price of the Company's common stock over this time period was $12.35 per share, which was 109% of the Company's March 31, 2013 tangible book value of $11.38.
The Company announced on May 20, 2013 that its Board of Directors approved a new stock repurchase program for up to 2,730,026 shares, or 10% of the then current outstanding shares. United also announced that the Company's regulator, the Federal Reserve Bank of Boston, has completed its review of its stock repurchase proposal and has considered all the facts of record. Acting pursuant to authority delegated by the Board of Governors of the Federal Reserve System, the Reserve Bank does not object to the proposal, and the Company may proceed with the stock repurchase program.
Under the new program, repurchases may be made from time to time in open-market or negotiated transactions as deemed appropriate by the Company and will depend on market conditions. Open market purchases will be conducted in accordance with the limitations set forth in Rule 10b-18 of the Securities and Exchange Commission and other applicable legal requirements. Any repurchased shares will be held as treasury stock and will be available for general corporate purposes, including the funding of the Company's equity incentive plan. Adoption of the program does not require the Company to purchase the authorized share amount, and the program can be modified or abandoned at any time.
As part of the second-step conversion and stock offering completed in 2011, the
Bank authorized the Company to lend funds to the ESOP to purchase 684,395 shares,
276,017 shares of which were purchased during the initial public offering at a cost
of $10.00 per share. In March 2011, the remaining shares totaling 408,378 were subsequently
purchased by the ESOP in the open market at an average cost of $10.56 per share,
or $4.3 million. The interest rate for the ESOP loans is the prime rate plus one
percent, or 4.25% as of December 31, 2011. As of December 31, 2012, the outstanding
balance for the loan was $6.8 million. Principal payments of $300,000 have been
made on the loan since inception. Dividends paid in 2012 totaling $510,000 on all
unallocated ESOP shares were offset to the interest payable on the note owed by
The Bank intends to make annual contributions to the ESOP that will be adequate
to fund the payment of regular debt service requirements attributable to the indebtedness
of the ESOP. Contributions will be $5.7 million and $10.5 million for the four year
period ending 2015 and the 25 year period ending 2040, respectively.
As of December 31, 2012, there were 288 participants receiving an ESOP allocation
with an aggregate eligible compensation of $19.3 million. The shares were allocated
among the participants in proportion to each individual’s compensation as a percentage
of the total aggregate compensation. Compensation was capped at $250,000 for 2012,
as prescribed by law.
The total ESOP expense was $1.5 million, $1.3 million and $803,000 for the years
ended December 31, 2012, 2011 and 2010, respectively. At December 31, 2012, there
were 894,564 allocated and 851,004 unallocated ESOP shares and the unallocated shares
had an aggregate fair value of $8.2 million.
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