United Financial Bancorp, Inc. (Nasdaq: UBNK), the holding company for United Bank, reported net income of $2.0 million, or $0.12 per diluted share, for the first quarter of 2008 compared to net income of $834,000, or $0.05 per diluted share, for the corresponding period in 2007.
The Company's improved results were largely due to a significant increase in net interest income, driven by net interest margin expansion and growth in average earning assets largely funded by net cash proceeds of $82.7 million from the Company's December 2007 second-step stock offering. The quarterly operating performance was also favorably impacted by an increase in fee income from deposit and wealth management accounts and a lower provision for loan losses, partially offset by expansion in non-interest expenses. The Company also announced a quarterly cash dividend of $0.07 per share, payable on May 27, 2008 to shareholders of record as of May 13, 2008.
Total assets increased $74.0 million, or 6.9%, to $1.2 billion at March 31, 2008 from $1.1 billion at year end 2007 reflecting growth of $70.1 million, or 34.8%, in securities available for sale. The significant increase in securities available for sale was due to the implementation of a strategy to deploy excess capital and liquidity resulting from the aforementioned stock offering. During the quarter, management purchased agency mortgage-backed securities with predictable cash flows and an average spread to treasury securities in excess of 200 basis points. Balance sheet expansion was funded by an increase of $36.8 million, or 5.1%, in total deposits and an increase of $25.3 million, or 6.8%, in Federal Home Loan Bank advances.
"I am very pleased with the financial results for our first quarter as a fully public company," commented Richard B. Collins, President and Chief Executive Officer. "Although we continue to operate in a challenging banking and economic environment, we have benefited from significant improvement in net interest margin, steady asset quality and growth in average loans, core deposits and fee income. As a result of our improved performance, we are rewarding our shareholders by increasing our quarterly dividend payment to $0.07 per share."
Financial Highlights:
-- At March 31, 2008, outstanding loan balances totaled $825.0 million, essentially flat in comparison to the prior year end as a result of payoffs of several large credits and sluggish loan activity. Origination volume moderated in the first quarter of 2008, reflecting a slowdown in the real estate market, weaker demand for all loan types and a very competitive lending environment.
-- Non-performing assets totaled $3.7 million, or 0.32% of total assets, at March 31, 2008 compared to $2.7 million, or 0.25% of total assets, at December 31, 2007. The increase of $1.0 million in non-performing assets was mainly attributable to two residential loans with outstanding balances totaling $886,000 which became more than 90 days delinquent in March 2008. Management believes that these loans are adequately secured. The Company has not historically originated loans to sub-prime borrowers and approximately 96% of its investment portfolio consists of mortgage-backed and debt securities issued by government sponsored enterprises.
-- At March 31, 2008, the ratio of the allowance for loan losses to total loans was 0.93% and the ratio of the allowance for loan losses to non-performing loans was 285.41%. For the three months ended March 31, 2008, net charge-offs totaled $252,000, or 0.12% of average loans outstanding on an annualized basis.
-- Total deposits increased $36.8 million, or 5.1%, to $755.5 million at March 31, 2008 compared to $718.7 million at December 31, 2007 mainly due to competitive products and pricing, superior customer service, targeted promotional activities and our new East Longmeadow branch, which opened in January 2008. Core deposit balances grew $25.3 million, or 6.8%, to $396.3 million at March 31, 2008 from $371.0 million at December 31, 2007.
-- Net interest income increased $2.1 million, or 29.8%, to $9.0 million for the first quarter of 2008 from the same period in 2007 as a result of net interest margin expansion and growth in earning assets. Net interest margin increased 58 basis points to 3.40% due to the use of net proceeds from the Company's second-step stock offering completed in December 2007 to fund asset growth as well as a significant decrease in the cost of deposits as a result of the 300 basis points reduction in the federal funds rate from 5.25% at September 1, 2007 to 2.25% at March 31, 2008. Average earning assets expanded $76.9 million, or 7.8%, to $1.1 billion, mainly due to loan growth and purchases of mortgage-backed securities.
-- Non-interest income expanded $121,000, or 8.7%, to $1.5 million for the three months ended March 31, 2008 due to increases of $39,000, or 3.8%, in fee income from deposit accounts and $29,000, or 24.0%, in wealth management revenue. These results also include a $49,000 gain in the first quarter of 2008 from VISA Inc.'s redemption of its Class B stock as part of its initial public offering. Prior to its IPO, VISA Inc. issued these shares to its members in a reorganization based upon transaction volume.
-- Non-interest expenses grew $529,000, or 8.0%, to $7.2 million for the first three months of 2008, mainly attributable to increases of $203,000, or 5.3%, in salaries and benefits, $54,000, or 13.9%, in professional services, $77,000, or 12.0%, in data processing expenses and $36,000, or 11.2%, in marketing expenses. The increase in salaries and benefits reflect staffing costs for our new East Longmeadow branch, new employees hired to support and facilitate the growth of the Company, a higher cash incentive accrual associated with improved financial performance and annual wage adjustments. -- United Financial Bancorp, Inc.
Comment and add to the story without registration, but keep the comments meaningful please. Links are not accepted.
