Form 10-Q
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
___________________________________
FORM
10-Q
(Mark
One)
ý
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act
of 1934
For
the quarterly period ended June 30, 2006
OR
o
Transition report pursuant to section 13 or 15(d) of the Securities Exchange
Act
of 1934
For
the transition period from ______________ to _____________
Commission
File Number 000-51369
United
Financial Bancorp, Inc.
(Exact
name of registrant as specified in its charter)
Federal
|
83-0395247
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
Number)
|
95
Elm Street, West Springfield, Massachusetts 01089
(Address
of principal executive offices)
Registrant's
telephone number, including area code: (413)
787-1700
Indicate
by check mark whether the Registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days. Yes ý No
o
Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer o
|
Accelerated
filer ý
|
Non-accelerated
filer o
|
Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o
No
ý
Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date:
Common
stock, $0.01 par value
16,865,995
shares outstanding as of August 09, 2006
United
Financial Bancorp, Inc.
|
|
|
Page
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
21
|
|
|
|
|
|
|
|
21
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
24
|
|
Exhibit
3.3
|
Bylaws
of United Financial Bancorp, Inc
|
25
|
|
|
|
|
|
Exhibit
31.1
|
Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
36
|
|
|
|
|
|
Exhibit
31.2
|
Certification
of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
37
|
|
|
|
|
|
Exhibit
32.1
|
Statement
of Chief Executive Officer Furnished Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
38
|
|
|
|
|
|
Exhibit
32.2
|
Statement
of Chief Financial Officer Furnished Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
39
|
UNITED
FINANCIAL BANCORP, INC. AND SUBSIDIARY
(Dollars
in thousands, except per share amounts)
|
|
June
30,
|
|
December
31,
|
|
|
|
2006
|
|
2005
|
|
|
|
(unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and due from banks
|
|
$
|
18,790
|
|
$
|
15,841
|
|
Interest-bearing
deposits
|
|
|
5,154
|
|
|
2
|
|
Liquidity
and federal funds sold
|
|
|
34
|
|
|
-
|
|
Total
cash and cash equivalents
|
|
|
23,978
|
|
|
15,843
|
|
|
|
|
|
|
|
|
|
Securities
available for sale, at fair value
|
|
|
213,842
|
|
|
226,465
|
|
Securities
to be held to maturity, at amortized cost (fair value $3,254 at
|
|
|
|
|
|
|
|
June
30, 2006 and $3,298 at December 31, 2005)
|
|
|
3,295
|
|
|
3,325
|
|
Loans,
net of allowance for loan losses of $6,825 at June 30, 2006
and
|
|
|
|
|
|
|
|
$6,382
at December 31, 2005
|
|
|
689,630
|
|
|
630,558
|
|
Other
real estate owned
|
|
|
250
|
|
|
1,602
|
|
Accrued
interest receivable
|
|
|
4,051
|
|
|
3,928
|
|
Deferred
tax asset, net
|
|
|
1,645
|
|
|
1,245
|
|
Stock
in the Federal Home Loan Bank of Boston
|
|
|
7,157
|
|
|
6,588
|
|
Banking
premises and equipment, net
|
|
|
8,505
|
|
|
8,236
|
|
Bank-owned
life insurance
|
|
|
6,186
|
|
|
6,031
|
|
Other
assets
|
|
|
3,304
|
|
|
2,692
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
961,843
|
|
$
|
906,513
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
Interest-bearing
|
|
$
|
599,294
|
|
$
|
560,310
|
|
Non-interest-bearing
|
|
|
97,656
|
|
|
93,301
|
|
Total
deposits
|
|
|
696,950
|
|
|
653,611
|
|
Federal
Home Loan Bank of Boston advances
|
|
|
114,990
|
|
|
101,880
|
|
Repurchase
agreements
|
|
|
6,809
|
|
|
8,434
|
|
Escrow
funds held for borrowers
|
|
|
964
|
|
|
1,129
|
|
Accrued
expenses and other liabilities
|
|
|
4,394
|
|
|
4,454
|
|
Total
liabilities
|
|
|
824,107
|
|
|
769,508
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
Preferred
stock, par value $0.01 per share, authorized 5,000,000
shares;
|
|
|
|
|
|
|
|
none
issued
|
|
|
-
|
|
|
-
|
|
Common
stock, par value $0.01 per share, authorized 60,000,000
shares;
|
|
|
|
|
|
|
|
17,205,995
shares issued at June 30, 2006 and at December 31, 2005
|
|
|
172
|
|
|
172
|
|
Paid-in
capital
|
|
|
78,476
|
|
|
78,446
|
|
Retained
earnings
|
|
|
68,848
|
|
|
66,944
|
|
Unearned
ESOP shares
|
|
|
(5,932
|
)
|
|
(6,092
|
)
|
Accumulated
other comprehensive loss, net of taxes
|
|
|
(3,828
|
)
|
|
(2,465
|
)
|
Total
stockholders’ equity
|
|
|
137,736
|
|
|
137,005
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
961,843
|
|
$
|
906,513
|
|
|
|
|
|
|
|
|
|
See
notes
to unaudited consolidated financial statements
UNITED
FINANCIAL BANCORP, INC. AND SUBSIDIARY
(Amounts
in thousands, except per share amount)
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|
|
June
30,
|
|
June
30,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
Interest
and dividend income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
10,076
|
|
$
|
8,352
|
|
$
|
19,676
|
|
$
|
16,400
|
|
Investments
|
|
|
2,261
|
|
|
1,859
|
|
|
4,566
|
|
|
3,387
|
|
Other
interest-earning assets
|
|
|
288
|
|
|
116
|
|
|
530
|
|
|
256
|
|
Total
interest and dividend income
|
|
|
12,625
|
|
|
10,327
|
|
|
24,772
|
|
|
20,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
4,664
|
|
|
2,901
|
|
|
8,706
|
|
|
5,481
|
|
Short-term
borrowings
|
|
|
591
|
|
|
416
|
|
|
1,167
|
|
|
684
|
|
Long-term
debt
|
|
|
605
|
|
|
503
|
|
|
1,226
|
|
|
1,023
|
|
Total
interest expense
|
|
|
5,860
|
|
|
3,820
|
|
|
11,099
|
|
|
7,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income before provision for loan losses
|
|
|
6,765
|
|
|
6,507
|
|
|
13,673
|
|
|
12,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for loan losses
|
|
|
300
|
|
|
275
|
|
|
462
|
|
|
550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income after provision for loan losses
|
|
|
6,465
|
|
|
6,232
|
|
|
13,211
|
|
|
12,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fee
income on depositors’ accounts
|
|
|
1,036
|
|
|
923
|
|
|
1,982
|
|
|
1,746
|
|
Income
from bank-owned life insurance
|
|
|
73
|
|
|
81
|
|
|
154
|
|
|
162
|
|
Other
income
|
|
|
332
|
|
|
252
|
|
|
563
|
|
|
482
|
|
Total
non-interest income
|
|
|
1,441
|
|
|
1,256
|
|
|
2,699
|
|
|
2,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and benefits
|
|
|
3,130
|
|
|
2,596
|
|
|
6,159
|
|
|
5,234
|
|
Occupancy
expenses
|
|
|
410
|
|
|
399
|
|
|
813
|
|
|
739
|
|
Marketing
expenses
|
|
|
350
|
|
|
335
|
|
|
765
|
|
|
680
|
|
Data
processing expenses
|
|
|
558
|
|
|
563
|
|
|
1,190
|
|
|
1,229
|
|
Contributions
and sponsorships
|
|
|
86
|
|
|
37
|
|
|
117
|
|
|
110
|
|
Professional
fees
|
|
|
223
|
|
|
108
|
|
|
479
|
|
|
219
|
|
Other
expenses
|
|
|
1,079
|
|
|
788
|
|
|
2,089
|
|
|
1,552
|
|
Total
non-interest expense
|
|
|
5,836
|
|
|
4,826
|
|
|
11,612
|
|
|
9,763
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
2,070
|
|
|
2,662
|
|
|
4,298
|
|
|
4,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax expense
|
|
|
780
|
|
|
1,063
|
|
|
1,653
|
|
|
1,966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME
|
|
$
|
1,290
|
|
$
|
1,599
|
|
$
|
2,645
|
|
$
|
2,966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted earnings per share
|
|
$
|
0.08
|
|
|
NA
|
|
$
|
0.16
|
|
|
NA
|
|
Weighted-average
common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for
basic and diluted earnings per share
|
|
|
16,609
|
|
|
NA
|
|
|
16,605
|
|
|
NA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NA
- Not applicable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
notes
to unaudited consolidated financial statements.
UNITED
FINANCIAL BANCORP, INC. AND SUBSIDIARY
FOR
THE
SIX MONTHS ENDED JUNE 30, 2006 and 2005
(Amounts
in thousands, except per share amount)
|
|
|
|
|
|
|
|
Unearned
|
|
Other
|
|
|
|
|
|
Common
|
|
Paid-In
|
|
Retained
|
|
ESOP
|
|
Comprehensive
|
|
|
|
|
|
Stock
|
|
Capital
|
|
Earnings
|
|
Shares
|
|
Loss
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances
at December 31, 2004
|
|
$
|
-
|
|
$
|
-
|
|
$
|
62,667
|
|
$
|
-
|
|
$
|
(412
|
)
|
$
|
62,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
-
|
|
|
-
|
|
|
2,966
|
|
|
-
|
|
|
-
|
|
|
2,966
|
|
Net
unrealized loss on securities available for sale, net of
taxes
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(337
|
)
|
|
(337
|
)
|
Total
comprehensive income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances
at June 30, 2005
|
|
$
|
-
|
|
$
|
-
|
|
$
|
65,633
|
|
$
|
-
|
|
$
|
(749
|
)
|
$
|
64,884
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances
at December 31, 2005
|
|
|
172
|
|
|
78,446
|
|
|
66,944
|
|
|
(6,092
|
)
|
|
(2,465
|
)
|
|
137,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
-
|
|
|
-
|
|
|
2,645
|
|
|
-
|
|
|
-
|
|
|
2,645
|
|
Net
unrealized loss on securities available for sale, net of
taxes
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,363
|
)
|
|
(1,363
|
)
|
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
dividends declared ($0.10 per share)
|
|
|
-
|
|
|
-
|
|
|
(741
|
)
|
|
-
|
|
|
-
|
|
|
(741
|
)
|
ESOP
shares committed to be released
|
|
|
-
|
|
|
30
|
|
|
-
|
|
|
160
|
|
|
-
|
|
|
190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances
at June 30, 2006
|
|
$
|
172
|
|
$
|
78,476
|
|
$
|
68,848
|
|
$
|
(5,932
|
)
|
$
|
(3,828
|
)
|
$
|
137,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
notes
to unaudited consolidated financial statements.
UNITED
FINANCIAL BANCORP, INC. AND SUBSIDIARY
FOR
THE
SIX MONTHS ENDED JUNE 30, 2006 and 2005
(Dollars
in thousands)
|
|
Six
Months Ended
|
|
|
|
June
30,
|
|
|
|
2006
|
|
2005
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
2,645
|
|
$
|
2,966
|
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
Provision
for loan losses
|
|
|
462
|
|
|
550
|
|
ESOP
expense
|
|
|
190
|
|
|
-
|
|
Amortization
of premiums and discounts
|
|
|
201
|
|
|
382
|
|
Provision
for other real estate owned
|
|
|
34
|
|
|
-
|
|
Depreciation
and amortization
|
|
|
363
|
|
|
311
|
|
Net
loss (gain) on sale of property and equipment
|
|
|
21
|
|
|
(4
|
)
|
Deferred
income tax benefit
|
|
|
(609
|
)
|
|
(132
|
)
|
Increase
in Bank-owned life insurance
|
|
|
(154
|
)
|
|
(162
|
)
|
Increase
in accrued interest receivable
|
|
|
(123
|
)
|
|
(593
|
)
|
Increase
in other assets
|
|
|
(514
|
)
|
|
(1,133
|
)
|
Decrease
in accrued expenses and other liabilities
|
|
|
(60
|
)
|
|
(368
|
)
|
|
|
|
|
|
|
|
|
Net
cash provided by operating activities
|
|
|
2,456
|
|
|
1,817
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
Cash
paid to acquire Levine Financial Group
|
|
|
(100
|
)
|
|
-
|
|
Purchases
of securities available for sale
|
|
|
(11,831
|
)
|
|
(77,525
|
)
|
Proceeds
from maturities and principal repayments of securities available
for sale
|
|
|
23,104
|
|
|
18,388
|
|
Purchase
of securities held to maturity
|
|
|
-
|
|
|
(909
|
)
|
Proceeds
from maturities and principal repayments of securities held to
maturity
|
|
|
25
|
|
|
25
|
|
Purchases
of Federal Home Loan Bank of Boston stock
|
|
|
(569
|
)
|
|
(154
|
)
|
Proceeds
from sales of other real estate owned
|
|
|
1,568
|
|
|
-
|
|
Net
loan originations and principal repayments
|
|
|
(59,784
|
)
|
|
(19,411
|
)
|
Purchases
of property and equipment
|
|
|
(652
|
)
|
|
(363
|
)
|
Proceeds
from sale of property and equipment
|
|
|
-
|
|
|
16
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(48,239
|
)
|
|
(79,933
|
)
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
Net
increase in deposits
|
|
|
43,339
|
|
|
41,313
|
|
Proceeds
of Federal Home Loan Bank of Boston advances
|
|
|
65,307
|
|
|
54,626
|
|
Repayments
of Federal Home Loan Bank of Boston advances
|
|
|
(52,197
|
)
|
|
(37,691
|
)
|
Proceeds
from stock offering subscriptions
|
|
|
-
|
|
|
116,547
|
|
Net
(decrease) increase in repurchase agreements
|
|
|
(1,625
|
)
|
|
3,653
|
|
Net
decrease in escrow funds held for borrowers
|
|
|
(165
|
)
|
|
(30
|
)
|
Cash
dividends paid
|
|
|
(741
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
53,918
|
|
|
178,418
|
|
|
|
|
|
|
|
|
|
Increase
in cash and cash equivalents
|
|
|
8,135
|
|
|
100,302
|
|
Cash
and cash equivalents at beginning of year
|
|
|
15,843
|
|
|
23,233
|
|
Cash
and cash equivalents at end of period
|
|
$
|
23,978
|
|
$
|
123,535
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosure of Cash Flow Information:
|
|
|
|
|
|
|
|
Cash
paid during the period:
|
|
|
|
|
|
|
|
Interest
on deposits and other borrowings
|
|
$
|
11,143
|
|
$
|
7,179
|
|
Income
taxes – net
|
|
|
867
|
|
|
2,027
|
|
|
|
|
|
|
|
|
|
See
notes
to unaudited consolidated financial statements.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2006
Dollars
in Thousands (except per share amounts)
NOTE
A - BASIS OF PRESENTATION
The
consolidated financial statements include the accounts of United Financial
Bancorp, Inc. and its wholly owned subsidiary, United Bank. The consolidated
financial statements also include the accounts of United Bank’s wholly owned
subsidiary, UCB Securities, Inc., which is engaged in buying, selling and
holding investment securities. These entities are collectively referred to
herein as “the Company.” All significant intercompany accounts and transactions
have been eliminated in consolidation.
The
accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America and
with general practices within the banking industry. In the opinion of
management, the accompanying unaudited interim consolidated financial statements
reflect all adjustments, consisting of normal recurring adjustments, which
are
necessary for the fair presentation of the Company’s financial condition as of
June 30, 2006 and the results of operations for the three months and six months
ended June 30, 2006 and 2005. The interim results of operations presented herein
are not necessarily indicative of the results to be expected for the entire
year. These financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto for the year ended
December 31, 2005 included in the Company’s Annual Report on Form 10-K, which
was filed by the Company at the Securities and Exchange Commission on March
30,
2006 and amended on April 28, 2006.
Certain
amounts in the prior period financial statements have been reclassified to
conform to the current period presentation.
NOTE
B - CRITICAL ACCOUNTING POLICIES
In
preparing the financial statements, management is required to make estimates
and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities as of the date of the balance
sheet as well as revenues and expenses for the reporting period. Actual results
could differ from these estimates.
The
allowance for loan losses is a critical accounting estimate because it is highly
susceptible to change from period to period. Arriving at an appropriate level
for the allowance for loan losses necessarily involves a high degree of
judgment. While management uses available information to recognize losses on
loans, future additions to the allowance for loans may be necessary based on
changes in the factors considered in evaluating the adequacy of the allowance,
including prior loss experience, current economic conditions and their effect
on
borrowers, the character and size of the portfolio, trends in nonperforming
loans and delinquency rates and the performance of individual loans in relation
to contractual terms.
The
assessment of whether a valuation allowance for the Company’s deferred tax
assets is required is also a critical accounting estimate. In assessing the
realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or all of such assets will not be realized.
This assessment is made each reporting period based upon an estimate of future
taxable income during the periods in which existing temporary differences become
deductible.
NOTE
C - EARNINGS PER SHARE
Earnings
per share have been computed in accordance with SFAS No. 128,
“Earnings Per Share.” Basic earnings per share have been calculated by dividing
net income by weighted average shares outstanding before any dilution and
adjusted to exclude the weighted average number of unallocated shares held
by
the ESOP. Diluted earnings per share have been calculated by dividing net income
by weighted average shares outstanding. The Company had no dilutive potential
common shares outstanding at June 30, 2006.
The
calculation of earnings per common share and diluted earnings per common share
for the three and six month periods ended June 30, 2006 is presented below.
Earnings per share is not applicable for the 2005 periods since the Company
did
not complete its initial public offering until July 12, 2005.
|
|
Three
Months
|
|
Six
Months
|
|
|
|
Ended
|
|
Ended
|
|
|
|
June
30, 2006
|
|
June
30, 2006
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
1,290
|
|
$
|
2,645
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares applicable to basic EPS
|
|
|
16,609
|
|
|
16,605
|
|
Effect
of dilutive potential common shares
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares applicable to diluted EPS
|
|
|
16,609
|
|
|
16,605
|
|
|
|
|
|
|
|
|
|
Earnings
per share:
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.08
|
|
$
|
0.16
|
|
Diluted
|
|
$
|
0.08
|
|
$
|
0.16
|
|
NOTE
D - LOANS
The
components of loans were as follows at June 30, 2006 and December 31, 2005:
|
|
June
30,
|
|
December
31,
|
|
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
One-to-four
family residential real estate
|
|
$
|
296,717
|
|
$
|
285,236
|
|
Commercial
real estate
|
|
|
163,300
|
|
|
150,099
|
|
Construction
|
|
|
40,931
|
|
|
28,872
|
|
Home
equity loans
|
|
|
100,057
|
|
|
86,045
|
|
Commercial
and industrial
|
|
|
64,464
|
|
|
59,591
|
|
Consumer
|
|
|
29,752
|
|
|
25,949
|
|
Total
loans
|
|
|
695,221
|
|
|
635,792
|
|
|
|
|
|
|
|
|
|
Net
deferred loan costs and fees
|
|
|
1,234
|
|
|
1,148
|
|
Allowance
for loan losses
|
|
|
(6,825
|
)
|
|
(6,382
|
)
|
Loans,
net
|
|
$
|
689,630
|
|
$
|
630,558
|
|
|
|
|
|
|
|
|
|
Nonaccrual
loans amounted to $2,315 and $1,717 at June
30,
2006 and December 31, 2005,
respectively.
NOTE
E - ALLOWANCE FOR LOAN LOSSES
A
summary
of the activity in the allowance for loan losses is as follows:
|
|
For
the Six Months Ended June 30,
|
|
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at beginning of period
|
|
$
|
6,382
|
|
$
|
5,750
|
|
Provision
for loan losses
|
|
|
462
|
|
|
550
|
|
Charge-offs
|
|
|
(58
|
)
|
|
(248
|
)
|
Recoveries
|
|
|
39
|
|
|
162
|
|
Balance
at end of period
|
|
$
|
6,825
|
|
$
|
6,214
|
|
|
|
|
|
|
|
|
|
NOTE
F - COMMITMENTS
Financial
instruments with off-balance sheet risk at June 30, 2006 and December 31, 2005
were as follows:
|
|
June
30,
|
|
December
31,
|
|
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
Unused
lines of credit
|
|
$
|
124,988
|
|
$
|
114,016
|
|
Amounts
due mortgagors
|
|
|
39,771
|
|
|
16,833
|
|
Standby
letters of credit
|
|
|
1,129
|
|
|
1,383
|
|
Commitments
to originate loans
|
|
|
37,060
|
|
|
14,494
|
|
NOTE
G - DEPOSITS
Deposit
accounts, by type, are summarized as follows at June 30, 2006 and December 31,
2005:
|
|
June
30,
|
|
December
31,
|
|
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
Demand
|
|
$
|
97,656
|
|
$
|
93,301
|
|
NOW
|
|
|
41,990
|
|
|
39,922
|
|
Regular
savings
|
|
|
79,831
|
|
|
87,253
|
|
Money
market
|
|
|
159,057
|
|
|
155,492
|
|
Certificates
of deposit
|
|
|
318,416
|
|
|
277,643
|
|
|
|
$
|
696,950
|
|
$
|
653,611
|
|
|
|
|
|
|
|
|
|
NOTE
H - CONTINGENCIES
The
Company is a defendant in certain claims and legal actions arising in the
ordinary course of business. In the opinion of management, after consultation
with legal counsel, the ultimate disposition of these matters is not expected
to
have a material adverse effect on the condensed consolidated financial
statements of the Company.
NOTE
I - SUBSEQUENT EVENTS
On
July
20, 2006, the Board of Directors declared a cash dividend of $0.05 per share.
The dividend is payable on August 22, 2006 to stockholders of record as of
August 8, 2006. United Mutual Holding Company intends to waive receipt of
dividends paid on the shares it owns of the Company.
The
Company held its Annual Stockholders Meeting on July 20, 2006, at which time
shareholders approved the 2006 United Financial Bancorp, Inc. Stock-Based
Incentive Plan (the “Incentive Plan”). The Incentive Plan authorizes the
issuance of up to 1,180,330 shares of Company common stock pursuant to grants
of
incentive and non-statutory stock options, stock appreciation rights and
restricted stock awards, provided that no more than 337,237 shares may be issued
as restricted stock awards, and no more than 843,093 shares may be issued
pursuant to the exercise of stock options.
On
July
20, 2006, the Board of Directors approved a stock repurchase program to fund
the
restricted stock portion of its 2006 Stock-Based Incentive Plan. Under the
program, the Company is authorized to repurchase up to 340,000 shares from
time
to time, depending on market conditions, at prevailing market prices in
open-market or privately negotiated transactions over a six-month period. The
authorized share repurchases represent approximately 2.0% of the Company’s total
outstanding common stock, or about 4.2% of the Company's publicly traded shares.
Forward-Looking
Statements
From
time
to time, the Company may publish forward-looking statements relating to such
matters as anticipated financial performance, business prospects, technological
developments, new products, and similar matters. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor for forward-looking
statements provided that the Company notes that a variety of factors could
cause
the Company’s actual results to differ materially from the anticipated results
expressed in the Company’s forward-looking statements. Factors that may cause
actual results to differ materially from those projected in the forward-looking
statements include, but are not limited to, general economic conditions that
are
less favorable than expected, changes in market interest rates that result
in
reduced interest margins, risks in the loan portfolio, including prepayments
that are greater than expected, the enactment of legislation or regulatory
changes that have a less than favorable impact on the business of the Company,
and significant increases in competitive pressures. Forward-looking statements
speak only as of the date they are made and the Company does not undertake
to
update forward- looking statements to reflect circumstances or events that
occur
after the date of the forward-looking statements or to reflect the occurrence
of
unanticipated events. Accordingly, past results and trends should not be used
by
investors to anticipate future results or trends.
Critical
Accounting Policies
Critical
accounting policies are those that involve significant judgments and assumptions
by management and that have, or could have, a material impact on our income
or
the carrying value of our assets. Our critical accounting policies are those
related to our allowance for loan losses and the valuation of deferred income
taxes.
The
allowance for loan losses is a critical accounting estimate because it is highly
susceptible to change from period to period. Arriving at an appropriate level
for the allowance for loan losses necessarily involves a high degree of
judgment. While management uses available information to recognize losses on
loans, future additions to the allowance for loans may be necessary based on
changes in the factors considered in evaluating the adequacy of the allowance,
including prior loss experience, current economic conditions and their effect
on
borrowers, the character and size of the portfolio, trends in nonperforming
loans and delinquency rates and the performance of individual loans in relation
to contractual terms.
The
assessment of whether a valuation allowance for the Company’s deferred tax
assets is required is also a critical accounting estimate. In assessing the
realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or all of such assets will not be realized.
This assessment is made each reporting period based upon an estimate of future
taxable income during the period in which existing temporary differences become
deductible.
Comparison
of Financial Condition at June 30, 2006 and December 31,
2005
Total
assets increased $55.3 million, or 6.1%, to $961.8 million at June 30, 2006
from $906.5 million at December 31, 2005 due in large part to strong
growth in net loans and to a lesser extent an increase in cash and cash
equivalents. Net loans increased $59.1 million, or 9.4%, to $689.6 million
at
June 30, 2006 from $630.6 million at December 31, 2005. Loan growth
was solid in all categories reflecting a sound local economy, a stable real
estate market, continued demand in our primary market areas for our products
and
successful business development efforts. The increase in loans was also
attributable to the Company’s practice of originating residential loans for
portfolio.
Cash
and
cash equivalents increased $8.1 million to $24.0 million at June 30, 2006
reflecting an intentional buildup of funds to support future growth in loans.
Securities available for sale decreased $12.6 million, or 5.6%, to
$213.8 million at June 30, 2006 from $226.5 million at
December 31, 2005 in connection with maturities of certain debt instruments
and normal amortization of the mortgage-backed securities portfolio, somewhat
offset by purchases of mortgage-backed and agency securities. The cash flows
from investment securities were used to support loan growth.
The
growth in assets was primarily funded by increases in deposits and, to a lesser
extent, Federal Home Loan Bank advances. Total deposits grew $43.3 million,
or 6.6%, to $697.0 million at June 30, 2006 from $653.6 million at
December 31, 2005 mainly due to an increase of $40.8 million in certificate
of deposit balances. During the period, customer demand for deposits shifted
from savings towards higher-yielding certificates of deposit accounts. Demand
and NOW account balances grew $6.4 million, or 4.8%, for the first six months
of
2006 in connection with increased marketing and promotional activity in an
effort to attract new customers and retain existing funds. At June 30, 2006,
core deposits totaled $378.5 million, or 54.3% of deposits.
Federal
Home Loan Bank advances increased $13.1 million, or 12.9%, to $115.0
million at June 30, 2006 from $101.9 million at December 31, 2005. The
increase in advances reflected the funding of the balance sheet growth.
Repurchase agreements decreased to $6.8 million at June 30, 2006 from
$8.4 million at December 31, 2005, reflecting routine fluctuations in
these overnight accounts.
Total
stockholders’ equity increased $731,000, or 0.5%, to $137.7 million at June 30,
2006 from $137.0 million at December 31, 2005. This increase
reflected net
income of $2.6 million for the six months ended June 30, 2006, partially
offset by the payment of cash dividends totaling $741,000 and a $1.4 million
increase in the accumulated other comprehensive loss. The increase in the
accumulated other comprehensive loss was largely related to the reduction in
the
market value of securities available for sale caused by the impact of higher
intermediate- and long-term rates. This loss was not considered by management
to
be other than temporary.
Non-Performing
Assets. The
table
below sets forth the amounts and categories of our non-performing assets at
the
dates indicated.
|
|
At
June 30,
|
|
At
December 31,
|
|
|
|
2006
|
|
2005
|
|
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
Non-accrual
loans:
|
|
|
|
|
|
|
|
Residential
mortgages (1)
|
|
$
|
445
|
|
$
|
1,016
|
|
Commercial
mortgages
|
|
|
1,826
|
|
|
141
|
|
Construction
|
|
|
-
|
|
|
113
|
|
Commercial
and industrial
|
|
|
44
|
|
|
447
|
|
Total
non-accrual loans
|
|
|
2,315
|
|
|
1,717
|
|
|
|
|
|
|
|
|
|
Accruing
loans 90 days or more past due
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Total
non-performing loans
|
|
|
2,315
|
|
|
1,717
|
|
|
|
|
|
|
|
|
|
Other
real estate owned
|
|
|
250
|
|
|
1,602
|
|
Total
non-performing assets
|
|
$
|
2,565
|
|
$
|
3,319
|
|
|
|
|
|
|
|
|
|
Ratios:
|
|
|
|
|
|
|
|
Total
non-performing loans to total loans
|
|
|
0.33
|
%
|
|
0.27
|
%
|
Total
non-performing assets to total assets
|
|
|
0.27
|
%
|
|
0.37
|
%
|
Allowance
for loan losses to non-performing loans
|
|
|
294.82
|
%
|
|
371.69
|
%
|
_______________________________________________ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Includes one- to four-family loans and home equity loans and lines
of
credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparison
of Operating Results for the Three Months Ended June 30, 2006 and
2005
Overview
Our
results of operations depend primarily on our net interest income. Net interest
income is the difference between the interest income we earn on our
interest-earning assets, consisting primarily of loans, investment securities
(including mortgage-backed securities, other securities and corporate and
municipal bonds) and other interest-earning assets (primarily cash and cash
equivalents), and the interest paid on our interest-bearing liabilities,
consisting primarily of savings accounts, money market accounts, transaction
accounts, certificates of deposit and Federal Home Loan Bank
advances.
Our
results of operations also are affected by our provisions for loan losses,
non-interest income and non-interest expense. Non-interest income currently
consists primarily of deposit account fees, financial services fees, increases
in cash value-insurance and miscellaneous other income. In 2005 and 2006, the
Company generated minimal gains from the sale of securities and loans.
Non-interest expense currently consists primarily of compensation and employee
benefits, data processing, occupancy, marketing and public relations, printing
and office supplies, and other operating expenses. Our results of operations
also may be affected significantly by general and local economic and competitive
conditions, changes in market interest rates, governmental policies and actions
of regulatory authorities.
Net
Income
The
Company’s net income for the three months ended June 30, 2006 amounted to $1.3
million, or $0.08 per diluted share, compared to $1.6 million for the same
period in 2005. The Company did not report earnings per share in the second
quarter of 2005 since its initial public offering was not completed until July
2005. The earnings for the second quarter of 2006 declined $309,000 from the
prior year period primarily as a result of an increase in non-interest expense,
partially offset by expansion in net interest income and non-interest income.
Average
balances and yields.
The
following table sets forth average balance sheets, average yields and costs,
and
certain other information for the periods indicated. No tax-equivalent yield
adjustments were made, as the effect thereof was not material. All average
balances are daily average balances. Non-accrual loans were included in the
computation of average balances, but have been reflected in the table as loans
carrying a zero yield.
|
|
Three
Months Ended June 30,
|
|
|
|
2006
|
|
2005
|
|
|
|
|
|
Interest
|
|
|
|
|
|
Interest
|
|
|
|
|
|
Average
|
|
and
|
|
Yield/
|
|
Average
|
|
and
|
|
Yield/
|
|
|
|
Balance
|
|
Dividends
|
|
Cost
|
|
Balance
|
|
Dividends
|
|
Cost
|
|
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
real estate
|
|
$
|
396,811
|
|
$
|
5,731
|
|
|
5.78
|
%
|
$
|
355,336
|
|
$
|
4,935
|
|
|
5.56
|
%
|
Commercial
real estate
|
|
|
181,412
|
|
|
2,882
|
|
|
6.35
|
%
|
|
154,454
|
|
|
2,345
|
|
|
6.07
|
%
|
Commercial
and industrial
|
|
|
62,586
|
|
|
1,126
|
|
|
7.20
|
%
|
|
51,654
|
|
|
828
|
|
|
6.41
|
%
|
Consumer
and other
|
|
|
28,599
|
|
|
337
|
|
|
4.71
|
%
|
|
18,996
|
|
|
244
|
|
|
5.14
|
%
|
Total
loans
|
|
|
669,408
|
|
|
10,076
|
|
|
6.02
|
%
|
|
580,440
|
|
|
8,352
|
|
|
5.76
|
%
|
Investment
securities
|
|
|
220,844
|
|
|
2,261
|
|
|
4.10
|
%
|
|
197,865
|
|
|
1,859
|
|
|
3.76
|
%
|
Other
interest-earning assets
|
|
|
24,475
|
|
|
288
|
|
|
4.71
|
%
|
|
24,667
|
|
|
116
|
|
|
1.88
|
%
|
Total
interest-earning assets
|
|
|
914,727
|
|
|
12,625
|
|
|
5.52
|
%
|
|
802,972
|
|
|
10,327
|
|
|
5.14
|
%
|
Noninterest-earning
assets
|
|
|
30,540
|
|
|
|
|
|
|
|
|
29,964
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
945,267
|
|
|
|
|
|
|
|
$
|
832,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
accounts
|
|
$
|
81,496
|
|
|
169
|
|
|
0.83
|
%
|
$
|
97,669
|
|
|
154
|
|
|
0.63
|
%
|
Money
market
|
|
|
160,432
|
|
|
1,255
|
|
|
3.13
|
%
|
|
142,963
|
|
|
672
|
|
|
1.88
|
%
|
NOW
accounts
|
|
|
35,753
|
|
|
23
|
|
|
0.26
|
%
|
|
37,990
|
|
|
24
|
|
|
0.25
|
%
|
Certificates
of deposit
|
|
|
316,150
|
|
|
3,217
|
|
|
4.07
|
%
|
|
278,009
|
|
|
2,051
|
|
|
2.95
|
%
|
Total
interest-bearing deposits
|
|
|
593,831
|
|
|
4,664
|
|
|
3.14
|
%
|
|
556,631
|
|
|
2,901
|
|
|
2.08
|
%
|
FHLB
advances
|
|
|
111,316
|
|
|
1,122
|
|
|
4.03
|
%
|
|
95,615
|
|
|
856
|
|
|
3.58
|
%
|
Other
interest-bearing liabilities
|
|
|
6,898
|
|
|
74
|
|
|
4.29
|
%
|
|
8,960
|
|
|
63
|
|
|
2.81
|
%
|
Total
interest-bearing liabilities
|
|
|
712,045
|
|
|
5,860
|
|
|
3.29
|
%
|
|
661,206
|
|
|
3,820
|
|
|
2.31
|
%
|
Demand
deposits
|
|
|
88,872
|
|
|
|
|
|
|
|
|
85,282
|
|
|
|
|
|
|
|
Other
noninterest-bearing liabilities
|
|
|
6,710
|
|
|
|
|
|
|
|
|
22,653
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
807,627
|
|
|
|
|
|
|
|
|
769,141
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
137,640
|
|
|
|
|
|
|
|
|
63,795
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' equity
|
|
$
|
945,267
|
|
|
|
|
|
|
|
$
|
832,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
|
|
|
$
|
6,765
|
|
|
|
|
|
|
|
$
|
6,507
|
|
|
|
|
Interest
rate spread(1)
|
|
|
|
|
|
|
|
|
2.23
|
%
|
|
|
|
|
|
|
|
2.83
|
%
|
Net
interest-earning assets(2)
|
|
$
|
202,682
|
|
|
|
|
|
|
|
$
|
141,766
|
|
|
|
|
|
|
|
Net
interest margin(3)
|
|
|
|
|
|
|
|
|
2.96
|
%
|
|
|
|
|
|
|
|
3.24
|
%
|
Average
interest-earning assets to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
average
interest-bearing liabilities
|
|
|
|
|
|
|
|
|
128.46
|
%
|
|
|
|
|
|
|
|
121.44
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Net
interest rate spread represents the difference between the yield on average
interest-earning assets and the cost of average interest-bearing
liabilities.
(2) Net
interest-earning assets represents total interest-earning assets less total
interest-bearing liabilities.
(3) Net
interest margin represents net interest income divided by average total
interest-earning assets.
Rate/Volume
Analysis. The
following table presents the effects of changing rates and volumes on our net
interest income for the periods indicated. The rate column shows the effects
attributable to changes in rate (changes in rate multiplied by prior volume).
The volume column shows the effects attributable to changes in volume (changes
in volume multiplied by prior rate). The net column represents the sum of the
prior columns. For purposes of this table, changes attributable to both rate
and
volume, which cannot be segregated, have been allocated proportionately, based
on the changes due to rate and the changes due to volume.
|
|
Three
months ended June 30
|
|
|
|
2006
vs. 2005
|
|
|
|
Increase
(Decrease) Due to
|
|
|
|
Volume
|
|
Rate
|
|
Net
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
Interest-earning
assets:
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
Residential
real estate
|
|
$
|
593
|
|
$
|
203
|
|
$
|
796
|
|
Commercial
real estate
|
|
|
424
|
|
|
112
|
|
|
536
|
|
Commercial
and industrial
|
|
|
189
|
|
|
109
|
|
|
298
|
|
Consumer
and other
|
|
|
115
|
|
|
(21
|
)
|
|
94
|
|
Total
loans
|
|
|
1,321
|
|
|
403
|
|
|
1,724
|
|
Investment
securities
|
|
|
227
|
|
|
175
|
|
|
402
|
|
Other
interest-earning assets
|
|
|
(1
|
)
|
|
173
|
|
|
172
|
|
Total
interest-earning assets
|
|
|
1,547
|
|
|
751
|
|
|
2,298
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
Savings
accounts
|
|
|
(28
|
)
|
|
43
|
|
|
15
|
|
Money
market accounts
|
|
|
91
|
|
|
492
|
|
|
583
|
|
NOW
accounts
|
|
|
(1
|
)
|
|
-
|
|
|
(1
|
)
|
Certificates
of deposit
|
|
|
310
|
|
|
856
|
|
|
1,166
|
|
Total
interest-bearing deposits
|
|
|
372
|
|
|
1,391
|
|
|
1,763
|
|
FHLB
Advances
|
|
|
151
|
|
|
115
|
|
|
266
|
|
Other
interest-bearing liabilities
|
|
|
(17
|
)
|
|
28
|
|
|
11
|
|
Total
interest-bearing liabilities
|
|
|
506
|
|
|
1,534
|
|
|
2,040
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in net interest income
|
|
$
|
1,041
|
|
$
|
(783
|
)
|
$
|
258
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Interest Income Before Provision for Loan Losses. Net
interest income before provision for loan losses increased $258,000, or 4.0%,
to
$6.8 million for the three months ended June 30, 2006 reflecting growth in
average earning assets, substantially offset by net interest margin compression.
Net interest margin contracted 28 basis points to 2.96% for the three-month
period ended June 30, 2006 compared to 3.24% for the same period in 2005. Net
interest margin was affected by the flat yield curve, the increasingly
competitive pricing conditions for loans and deposits, a shift in deposit demand
towards higher-yielding money market and time deposit accounts and the impact
of
increased short-term market interest rates on the cost to fund earning assets.
Interest
Income.
Interest
income increased $2.3 million, or 22.3%, to $12.6 million for the three months
ended June 30, 2006 from $10.3 million for the prior year period reflecting
expansion in total average interest-earning asset balances and an increase
in
the yield on average interest-earning assets. Total average interest-earning
asset balances increased $111.8 million, or 13.9%, to $914.7 million for
the three months ended June 30, 2006 due in large part to strong loan growth
and
purchases of investment securities, funded largely by proceeds from the
Company’s initial public offering in July 2005, deposit growth and additional
FHLB advances. Total average loans increased $89.0 million, or 15.3%, to $669.4
million for the second quarter of 2006 as a result of solid origination
activity, partially offset by prepayments and normal
amortization.
Total average investment securities expanded $23.0 million, or 11.6%, to $220.8
million due to purchases of securities, somewhat offset by prepayments and
amortization in the existing portfolio. The yield on average interest-earning
assets increased 38 basis points to 5.52% for the second quarter of 2006 in
connection with the higher interest rate environment. The expansion in market
rates contributed to the repricing of a portion of the Company’s existing assets
and to higher rates for new assets. Since a significant amount of the Company’s
average interest-earning assets are fixed rate and the impact of Federal Reserve
Board actions was less pronounced on the long end of the yield curve, the effect
of the expansion in market rates was limited.
Interest
Expense. Interest
expense increased $2.1 million, or 53.4%, to $5.9 million for the three
months ended June 30, 2006 from $3.8 million for the prior year period due
to expansion in average interest-bearing liabilities and an increase in the
rate
paid for such liabilities. Average interest-bearing liabilities increased
$50.8 million, or 7.7%, to $712.0 million for the three months ended
June 30, 2006 from $661.2 million for the prior year period reflecting
growth in interest-bearing deposits and FHLB advances. Total average
interest-bearing deposits increased $37.2 million, or 6.7%, to $593.8 million
for the second quarter of 2006 mainly attributable to an increase in money
market and certificate of deposit balances, partially offset by a reduction
in
savings deposits. The decline in savings account balances reflected a shift
in
deposit demand towards money market and certificates of deposit products to
take
advantage of more attractive rates. Total average FHLB advances increased $15.7
million, or 16.4%, to $111.3 million to support loan growth. The average rate
paid on interest-bearing liabilities rose 98 basis points to 3.29% for the
three
months ended June 30, 2006 reflecting the impact of higher market rates related
to interest rate increases initiated by the Federal Reserve Board. Since a
large
portion of the Company’s interest-bearing liabilities are short-term, the impact
of the expansion in market rates was significant.
Provision
for Loan Losses. The
provision for loan losses was $300,000 for the three months ended June 30,
2006
as compared to $275,000 for the three months ended June 30, 2005. The allowance
for loan losses is based on management’s estimate of the probable losses
inherent in the portfolio, considering the impact of certain factors. Among
the
factors management may consider are prior loss experience, current economic
conditions and their effect on borrowers, the character and size of the
portfolio, trends in nonperforming loans and delinquency rates and the
performance of individual loans in relation to contractual terms. The provision
for loan losses reflects adjustments to the allowance based on management’s
review of the loan portfolio in light of those conditions. The allowance for
loan losses was $6.8 million, or 0.98%, of loans outstanding at June 30,
2006.
Non-interest
Income.
Non-interest income increased $185,000, or 14.7%, to $1.4 million for the
three months ended June 30, 2006. Fee income on depositors’ accounts rose
$113,000 as a result of growth in transaction account balances and activity.
Financial services income expanded $67,000 in connection with the purchase
of
the Levine business in the first quarter of 2006 and new accounts opened due
to
successful business development efforts.
Non-interest
Expense.
Non-interest expense increased $1.0 million, or 20.9%, to $5.8 million for
the three months ended June 30, 2006 from $4.8 million for the prior year
period. Total salaries and benefits increased $534,000 reflecting costs
aggregating $198,000 incurred in connection with the separation package for
the
Company’s former Chief Financial Officer, new employees hired to support the
growth of the Company, the cost of the Company’s Employee Stock Ownership Plan
and annual wage increases. Professional services costs increased $115,000 mainly
due to expenses incurred in connection with being a public company, including
SOX 404 compliance, audit and accounting, legal, consulting, investor-relations
and NASDAQ fees. Other non-interest expense increased $291,000 primarily due
to
increases in printing, office supplies, postage, furniture and equipment costs
and real estate owned expenses.
Income
Tax Expense.
Income tax expense for the three months ended June 30, 2006 was $780,000 as
compared to $1.1 million for the three months ended June 30, 2005 primarily
related to lower income before taxes. The effective tax rate was 37.7% and
39.9%
for the three months ended June 30, 2006 and 2005, respectively.
Comparison
of Operating Results for the Six Months Ended June 30, 2006 and
2005
Net
Income
The
Company’s net income for the six months ended June 30, 2006 amounted to $2.6
million, or $0.16 per diluted share, compared to $3.0 million for the same
period in 2005. The Company did not report earnings per share for the first
six
months of 2005 since its initial public offering was not completed until July
2005. The earnings for the first six months of 2006 declined $321,000 from
the
prior year period primarily as a result of an increase in non-interest expense,
partially offset by expansion in net interest income and non-interest income.
Average
balances and yields.
The
following table sets forth average balance sheets, average yields and costs,
and
certain other information for the periods indicated. No tax-equivalent yield
adjustments were made, as the effect thereof was not material. All average
balances are daily average balances. Non-accrual loans were included in the
computation of average balances, but have been reflected in the table as loans
carrying a zero yield.
|
|
Six
Months Ended June 30,
|
|
|
|
2006
|
|
2005
|
|
|
|
|
|
Interest
|
|
|
|
|
|
Interest
|
|
|
|
|
|
Average
|
|
and
|
|
Yield/
|
|
Average
|
|
and
|
|
Yield/
|
|
|
|
Balance
|
|
Dividends
|
|
Cost
|
|
Balance
|
|
Dividends
|
|
Cost
|
|
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
real estate
|
|
$
|
391,125
|
|
$
|
11,209
|
|
|
5.73
|
%
|
$
|
350,556
|
|
$
|
9,638
|
|
|
5.50
|
%
|
Commercial
real estate
|
|
|
175,528
|
|
|
5,662
|
|
|
6.45
|
%
|
|
155,592
|
|
|
4,677
|
|
|
6.01
|
%
|
Commercial
and industrial
|
|
|
60,887
|
|
|
2,145
|
|
|
7.05
|
%
|
|
52,318
|
|
|
1,595
|
|
|
6.10
|
%
|
Consumer
and other
|
|
|
27,658
|
|
|
660
|
|
|
4.77
|
%
|
|
18,886
|
|
|
490
|
|
|
5.19
|
%
|
Total
loans
|
|
|
655,198
|
|
|
19,676
|
|
|
6.01
|
%
|
|
577,352
|
|
|
16,400
|
|
|
5.68
|
%
|
Investment
securities
|
|
|
224,091
|
|
|
4,566
|
|
|
4.08
|
%
|
|
180,570
|
|
|
3,387
|
|
|
3.75
|
%
|
Other
interest-earning assets
|
|
|
23,251
|
|
|
530
|
|
|
4.56
|
%
|
|
23,308
|
|
|
256
|
|
|
2.20
|
%
|
Total
interest-earning assets
|
|
|
902,540
|
|
|
24,772
|
|
|
5.49
|
%
|
|
781,230
|
|
|
20,043
|
|
|
5.13
|
%
|
Noninterest-earning
assets
|
|
|
30,737
|
|
|
|
|
|
|
|
|
28,763
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
933,277
|
|
|
|
|
|
|
|
$
|
809,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
accounts
|
|
$
|
83,152
|
|
|
344
|
|
|
0.83
|
%
|
$
|
96,369
|
|
|
302
|
|
|
0.63
|
%
|
Money
market
|
|
|
160,974
|
|
|
2,438
|
|
|
3.03
|
%
|
|
143,999
|
|
|
1,239
|
|
|
1.72
|
%
|
NOW
accounts
|
|
|
35,607
|
|
|
45
|
|
|
0.25
|
%
|
|
37,326
|
|
|
46
|
|
|
0.25
|
%
|
Certificates
of deposit
|
|
|
301,664
|
|
|
5,879
|
|
|
3.90
|
%
|
|
272,501
|
|
|
3,894
|
|
|
2.86
|
%
|
Total
interest-bearing deposits
|
|
|
581,397
|
|
|
8,706
|
|
|
2.99
|
%
|
|
550,195
|
|
|
5,481
|
|
|
1.99
|
%
|
FHLB
advances
|
|
|
111,975
|
|
|
2,240
|
|
|
4.00
|
%
|
|
90,519
|
|
|
1,599
|
|
|
3.53
|
%
|
Other
interest-bearing liabilities
|
|
|
7,882
|
|
|
153
|
|
|
3.88
|
%
|
|
7,886
|
|
|
108
|
|
|
2.74
|
%
|
Total
interest-bearing liabilities
|
|
|
701,254
|
|
|
11,099
|
|
|
3.17
|
%
|
|
648,600
|
|
|
7,188
|
|
|
2.22
|
%
|
Demand
deposits
|
|
|
87,295
|
|
|
|
|
|
|
|
|
83,642
|
|
|
|
|
|
|
|
Other
noninterest-bearing liabilities
|
|
|
7,024
|
|
|
|
|
|
|
|
|
14,275
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
795,573
|
|
|
|
|
|
|
|
|
746,517
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
137,704
|
|
|
|
|
|
|
|
|
63,476
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' equity
|
|
$
|
933,277
|
|
|
|
|
|
|
|
$
|
809,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
|
|
|
$
|
13,673
|
|
|
|
|
|
|
|
$
|
12,855
|
|
|
|
|
Interest
rate spread(1)
|
|
|
|
|
|
|
|
|
2.32
|
%
|
|
|
|
|
|
|
|
2.91
|
%
|
Net
interest-earning assets(2)
|
|
$
|
201,286
|
|
|
|
|
|
|
|
$
|
132,630
|
|
|
|
|
|
|
|
Net
interest margin(3)
|
|
|
|
|
|
|
|
|
3.03
|
%
|
|
|
|
|
|
|
|
3.29
|
%
|
Average
interest-bearing assets to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
average
interest-bearing liabilities
|
|
|
|
|
|
|
|
|
128.70
|
%
|
|
|
|
|
|
|
|
120.45
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________________
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Net
interest rate spread represents the difference between the yield
on
average interest-earning assets and the cost of average interest-bearing
liabilities.
|
(2)
|
Net
interest-earning assets represents total interest-earning assets
less
total interest-bearing liabilities.
|
(3)
|
Net
interest margin represents net interest income divided by average
total
interest-earning assets.
|
Rate/Volume
Analysis
The
following table presents the effects of changing rates and volumes on our net
interest income for the periods indicated. The rate column shows the effects
attributable to changes in rate (changes in rate multiplied by prior volume).
The volume column shows the effects attributable to changes in volume (changes
in volume multiplied by prior rate). The net column represents the sum of the
prior columns. For purposes of this table, changes attributable to both rate
and
volume, which cannot be segregated, have been allocated proportionately, based
on the changes due to rate and the changes due to volume.
|
|
Six
months ended June 30
|
|
|
|
2006
vs. 2005
|
|
|
|
Increase
(Decrease) Due to
|
|
|
|
Volume
|
|
Rate
|
|
Net
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
Interest-earning
assets:
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
Residential
real estate
|
|
$
|
1,150
|
|
$
|
421
|
|
$
|
1,571
|
|
Commercial
real estate
|
|
|
627
|
|
|
358
|
|
|
985
|
|
Commercial
and industrial
|
|
|
282
|
|
|
268
|
|
|
550
|
|
Consumer
and other
|
|
|
209
|
|
|
(39
|
)
|
|
170
|
|
Total
loans
|
|
|
2,268
|
|
|
1,008
|
|
|
3,276
|
|
Investment
securities
|
|
|
868
|
|
|
311
|
|
|
1,179
|
|
Other
interest-earning assets
|
|
|
(2
|
)
|
|
276
|
|
|
274
|
|
Total
interest-earning assets
|
|
|
3,134
|
|
|
1,595
|
|
|
4,729
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
Savings
accounts
|
|
|
(45
|
)
|
|
87
|
|
|
42
|
|
Money
market accounts
|
|
|
126
|
|
|
1,073
|
|
|
1,199
|
|
NOW
accounts
|
|
|
(2
|
)
|
|
-
|
|
|
(2
|
)
|
Certificates
of deposit
|
|
|
354
|
|
|
1,632
|
|
|
1,986
|
|
Total
interest-bearing deposits
|
|
|
433
|
|
|
2,792
|
|
|
3,225
|
|
FHLB
Advances
|
|
|
411
|
|
|
230
|
|
|
641
|
|
Other
interest-bearing liabilities
|
|
|
-
|
|
|
45
|
|
|
45
|
|
Total
interest-bearing liabilities
|
|
|
844
|
|
|
3,067
|
|
|
3,911
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in net interest income
|
|
$
|
2,290
|
|
$
|
(1,472
|
)
|
$
|
818
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Interest Income Before Provision for Loan Losses. Net
interest income before provision for loan losses increased $818,000, or 6.4%,
to
$13.7 million for the six months ended June 30, 2006 reflecting growth in
average earning assets, substantially offset by net interest margin compression.
Net interest margin contracted 26 basis points to 3.03% for the six-month period
ended June 30, 2006 compared to 3.29% for the same period in 2005. Net interest
margin was affected by the flat yield curve, the increasingly competitive
pricing conditions for loans and deposits, a shift in deposit demand towards
higher-yielding money market and time deposit accounts and the impact of
increased short-term market interest rates on the cost to fund earning assets.
Interest
Income.
Interest
income increased $4.7 million, or 23.6%, to $24.8 million for the six months
ended June 30, 2006 from $20.0 million for the prior year period reflecting
expansion in total average interest-earning asset balances and an increase
in
the yield on average interest-earning assets. Total average interest-earning
asset balances increased $121.3 million, or 15.5%, to $902.5 million for
the six months ended June 30, 2006 due in large part to strong loan growth
and
purchases of investment securities, funded largely by proceeds
from
the
Company’s initial public offering in July 2005, deposit growth and additional
FHLB advances. Total average loans increased $77.8 million, or 13.5%, to $655.2
million for the first six months of 2006 as a result of solid origination
activity, partially offset by prepayments and normal amortization. Total average
investment securities expanded $43.5 million, or 24.1%, to $224.1 million due
to
the use of proceeds from the initial public offering in July 2005 to fund
purchases. The yield on average interest-earning assets increased 36 basis
points to 5.49% for the six months ended June 30, 2006 in connection with the
higher interest rate environment. The expansion in market rates contributed
to
the repricing of a portion of the Company’s existing assets and to increased
rates for new assets. Since a significant amount of the Company’s average
interest earning assets are fixed rate and the impact of Federal Reserve Board
actions was less pronounced on the long end of the yield curve, the effect
of
the expansion in market rates was constrained.
Interest
Expense. Interest
expense increased $3.9 million, or 54.4%, to $11.1 million for the six
months ended June 30, 2006 from $7.2 million for the prior year period due
to expansion in average interest-bearing liabilities and an increase in the
rate
paid for such liabilities. Average interest-bearing liabilities increased
$52.7 million, or 8.1%, to $701.3 million for the six months ended
June 30, 2006 from $648.6 million for the prior year period reflecting
growth in interest-bearing deposits and FHLB advances. Total average
interest-bearing deposits increased $31.2 million, or 5.7%, to $581.4 million
for the first six months of 2006 mainly attributable to growth in money market
and certificate of deposit balances, partially offset by a reduction in savings
balances. The decline in savings deposits was mainly attributable to a shift
in
market demand to money market and certificates of deposit products to take
advantage of more attractive rates. Total average FHLB advances increased $21.5
million, or 23.7%, to $112.0 million to support loan growth. The average rate
paid on interest-bearing liabilities rose 95 basis points to 3.17% for the
six
months ended June 30, 2006 reflecting interest rate increases initiated by
the
Federal Reserve Board. Since a large portion of the Company’s interest-bearing
liabilities are short-term, the impact of the expansion in market rates was
significant.
Provision
for Loan Losses. The
provision for loan losses was $462,000 for the six months ended June 30, 2006
as
compared to $550,000 for the same period in 2005.
The
allowance for loan losses is based on management’s estimate of the probable
losses inherent in the portfolio, considering the impact of certain factors.
Among the factors management may consider are prior loss experience, current
economic conditions and their effect on borrowers, the character and size of
the
portfolio, trends in nonperforming loans and delinquency rates and the
performance of individual loans in relation to contractual terms. The provision
for loan losses reflects adjustments to the allowance based on management’s
review of the loan portfolio in light of those conditions. The allowance for
loan losses was $6.8 million, or 0.98%, of loans outstanding at June 30,
2006.
Non-interest
Income.
Non-interest income increased $309,000, or 12.9%, to $2.7 million for the
six months ended June 30, 2006. Fee income on depositors’ accounts rose $236,000
as a result of growth in transaction account balances and activity. Financial
services income expanded $51,000 in connection with the purchase of the Levine
business in the first quarter of 2006 and new accounts opened due to successful
business development efforts.
Non-interest
Expense.
Non-interest expense increased $1.8 million, or 18.9%, to $11.6 million for
the six months ended June 30, 2006 from $9.8 million for the prior year
period. Total salaries and benefits increased $925,000 reflecting costs
aggregating $198,000 incurred in connection with the separation package for
the
Company’s former Chief Financial Officer, new employees hired to support the
growth of the Company, the cost of the Company’s Employee Stock Ownership Plan
and annual wage increases. Professional services costs increased $260,000 mainly
due to expenses incurred in connection with being a public company, including
SOX 404 compliance, audit and accounting, legal, consulting, investor-relations
and NASDAQ. Other non-interest expense increased $537,000 primarily due to
increases in printing, postage, office supplies, furniture and equipment costs
and real estate owned expenses.
Income
Tax Expense.
Income tax expense for the six months ended June 30, 2006 was $1.7 million
as
compared to $2.0 million for the same period in 2005 primarily related to lower
income before taxes. The effective tax rate was 38.5% and 39.9% for the six
months ended June 30, 2006 and 2005, respectively.
Market
Risk, Liquidity and Capital Resources
Market
Risk
The
majority of our assets and liabilities are monetary in nature. Consequently,
our
most significant form of market risk is interest rate risk (“IRR”). Our assets,
consisting primarily of mortgage loans, have longer maturities than our
liabilities, consisting primarily of deposits. As a result, a principal part
of
our business strategy is to manage IRR and reduce the exposure of our net
interest income (“NII”) to changes in market interest rates. Accordingly, our
Board of Directors has established an Asset/Liability Management Committee
which
is responsible for evaluating the IRR inherent in our assets and liabilities,
for determining the level of risk that is appropriate given our business
strategy, operating environment, capital, liquidity and performance objectives,
and for managing this risk consistent with the guidelines approved by the Board
of Directors. With the assistance of an IRR management consultant, the committee
monitors the level of IRR on a regular basis and generally meets at least on
a
quarterly basis to review our asset/liability policies and IRR position.
We
have
sought to manage our IRR in order to minimize the exposure of our earnings
and
capital to changes in interest rates. As part of our ongoing asset-liability
management, we currently use the following strategies to manage our IRR:
(i) using alternative funding sources, such as advances from the Federal
Home Loan Bank of Boston, to “match fund” longer-term one- to four-family
residential mortgage loans; (ii) investing in variable-rate mortgage-backed
securities; (iii) continued emphasis on increasing core deposits; (iv)
offering adjustable rate and shorter-term home equity loans, commercial real
estate loans and commercial and industrial loans; and (v) offering a
variety of consumer loans, which typically have shorter-terms. Shortening the
average maturity of our interest-earning assets by increasing our investments
in
shorter-term loans and securities, as well as loans and securities with variable
rates of interest, helps to better match the maturities and interest rates
of
our assets and liabilities, thereby reducing the exposure of our NII to changes
in market interest rates. By following these strategies, we believe that we
are
well-positioned to react to increases in market interest rates.
Net
interest income at-risk measures the risk of a decline in earnings due to
potential short-term and long term changes in interest rates. The table below
represents an analysis of our IRR as measured by the estimated changes in NII
over the next twelve months, resulting from an instantaneous and sustained
parallel shift in the yield curve (+200 and -200 basis points) at June 30,
2006
and December 31, 2005.
Net
Interest Income At-Risk
|
|
|
|
|
|
|
|
Estimated
Increase
|
|
Estimated
Increase
|
Change
in Interest Rates
|
|
(Decrease)
in NII
|
|
(Decrease)
in NII
|
(Basis
Points)
|
|
(June
30, 2006)
|
|
(December
31, 2005)
|
-200
|
|
8.7%
|
|
0.4%
|
Stable
|
|
0.0%
|
|
0.0%
|
+200
|
|
-7.7%
|
|
-3.4%
|
The
preceding income simulation analysis does not represent a forecast of NII and
should not be relied upon as being indicative of expected operating results.
These hypothetical estimates are based upon numerous assumptions, which are
subject to change, including: the nature and timing of interest rate levels
including the yield curve shape, prepayments on loans and securities, deposit
decay rates, pricing decisions on loans and deposits, reinvestment/replacement
of asset and liability cash flows, and others. Also, as market conditions
vary
from
those assumed in the income simulation models, the actual results will differ
reflecting prepayment/refinancing levels likely deviating from those assumed,
the varying impact of interest rate changes on caps and floors embedded in
adjustable rate loans, early withdrawal of deposits, changes in product
preferences, and other internal/external variables.
Liquidity
Liquidity
is the ability to meet current and future financial obligations of a short-term
nature. Our primary sources of funds consist of deposit inflows, loan repayments
and maturities and sales of securities. While maturities and scheduled
amortization of loans and securities are predictable sources of funds, deposit
flows and mortgage prepayments are greatly influenced by general interest rates,
economic conditions and competition. Our Asset/Liability Management Committee
is
responsible for establishing and monitoring our liquidity targets and strategies
in order to ensure that sufficient liquidity exists for meeting the borrowing
needs of our customers as well as unanticipated contingencies. We seek to
maintain a liquidity ratio of 10% or greater. For the quarter ended June 30,
2006 our liquidity ratio was 29.66%, compared to 32.72% at December 31, 2005.
We
regularly adjust our investments in liquid assets based upon our assessment
of
(1) expected loan demand, (2) expected deposit flows, (3) yields available
on interest-earning deposits and securities, and (4) the objectives of our
asset/liability management program. Excess liquid assets are generally invested
in interest-earning deposits and short- and intermediate-term
securities.
Our
most
liquid assets are cash and cash equivalents. The levels of these assets are
dependent on our operating, financing, lending and investing activities during
any given period. At June 30, 2006, cash and cash equivalents totaled $24.0
million. Securities classified as available-for-sale, which provide additional
sources of liquidity, totaled $213.8 million at June 30, 2006. In addition,
at
June 30, 2006, we had the ability to borrow a total of approximately $230.3
million from the Federal Home Loan Bank of Boston. On that date, we had $115.0
million in advances outstanding.
At
June
30, 2006, we had $37.1 million in loan commitments outstanding. In addition
to
commitments to originate loans, we had $125.0 million in unused lines of credit
to borrowers. Certificates of deposit due within one year of June 30, 2006
totaled $263.9 million, or 37.9% of total deposits. If these deposits do not
remain with us, we will be required to seek other sources of funds, including
other certificates of deposit and Federal Home Loan Bank advances. Depending
on
market conditions, we may be required to pay higher rates on such deposits
or
other borrowings than we currently pay on the certificates of deposit due on
or
before June 30, 2007. We believe however, based on past experience, that a
significant portion of our certificates of deposit will remain with us. We
have
the ability to attract and retain deposits by adjusting the interest rates
offered.
Capital
Resources
United
Bank is subject to various regulatory capital requirements, including a
risk-based capital measure. The risk-based capital guidelines include both
a
definition of capital and a framework for calculating risk-weighted assets
by
assigning balance sheet assets and off-balance sheet items to broad risk
categories. At June 30, 2006, the Bank exceeded all regulatory capital
requirements. United Bank is considered “well capitalized” under regulatory
requirements.
As
of June 30, 2006:
|
|
|
|
Risk-based
capital
|
17.1%
|
|
|
Core
capital
|
11.2%
|
|
|
Tangible
capital
|
11.2%
|
|
|
As
of December 31, 2005:
|
|
|
|
Risk-based
capital
|
18.3%
|
|
|
Core
capital
|
11.6%
|
|
|
Tangible
capital
|
11.6%
|
Off-Balance
Sheet Arrangements
As
a
financial services provider, we routinely are a party to various financial
instruments with off-balance-sheet risks, such as commitments to extend credit,
standby letters of credit and unused lines of credit. While these contractual
obligations represent our future cash requirements, a significant portion of
commitments to extend credit may expire without being drawn upon. Such
commitments are subject to the same credit policies and approval process
accorded to loans made by us. For additional information, see Note F,
“Commitments,” to our Consolidated Financial Statements.
|
Quantitative
and Qualitative Disclosures About Market
Risk
|
The
information required by this item is included above in Item 2, Management’s
Discussion and Analysis of Financial Condition and Results of Operations, under
the caption “Market Risk, Liquidity and Capital Resources.”
Under
the
supervision and with the participation of the Company’s management, including
the Company’s Chief Executive Officer and Chief Financial Officer, the Company
has evaluated the effectiveness of the design and operation of its disclosure
controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under
the Exchange Act) as of the end of the period covered by this report. Based
upon
that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that, as of the end of the period covered by this report, the
Company’s disclosure controls and procedures were effective to ensure that
information required to be disclosed in the reports that the Company files
or
submits under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the SEC’s rules and forms and in a timely
manner alerting them to material information relating to the Company (or its
consolidated subsidiary) required to be filed in its periodic SEC
filings.
No
change
in our internal controls over financial reporting (as defined in Rules 13a-15(f)
and 15(d)-15(f) under the Securities Exchange Act of 1934) occurred during
the
most recent fiscal quarter that has materially affected, or is reasonably likely
to materially affect, our internal control over financial reporting. In the
ordinary course of business, we routinely enhance our internal controls and
procedures for financial reporting by either upgrading our current systems
or
implementing new systems. Changes have been made and will be made to our
internal controls and procedures for financial reporting as a result of these
efforts.
At
June
30, 2006, the Company was not involved in any legal proceedings, the outcome
of
which would be material to the Company’s financial condition or results of
operations.
As
of
June 30, 2006, there have been no material changes to the risk factors set
forth
in our Annual Report on Form 10-K for the year ended
December 31,
2005.
|
Unregistered
Sales of Equity Securities and Use of
Proceeds
|
Not
applicable.
|
Defaults
Upon Senior Securities
|
Not
applicable.
|
Submission
of Matters to a Vote of Security
Holders
|
Not
applicable.
Not
applicable.
|
3.1
|
Charter
of United Financial Bancorp, Inc.
(1)
|
|
3.2
|
Resolution
and Consent of Sole Stockholder Amending the Charter of United Financial
Bancorp, Inc. (1)
|
|
3.3
|
Bylaws
of United Financial Bancorp, Inc.
|
|
4
|
Form
of Common Stock Certificate of United Financial Bancorp, Inc.
(1)
|
|
10.1
|
Form
of Employee Stock Ownership Plan
(1)
|
|
10.2
|
Executive
Supplemental Compensation Agreement by and between United Bank and
Richard
B. Collins (1)
|
|
10.3
|
Executive
Supplemental Compensation Agreement by and between United Bank and
Keith
E. Harvey (1)
|
|
10.4
|
Executive
Supplemental Compensation Agreement by and between United Bank and
John J.
Patterson (1)
|
|
10.5
|
United
Bank 2004 and 2005 Incentive Plans
(1)
|
|
10.6
|
Deferred
Income Agreement by and between United Bank and Donald G. Helliwell
(1)
|
|
10.7
|
Deferred
Income Agreement by and between United Bank and Robert W. Bozenhard,
Jr.
(1)
|
|
10.8
|
Deferred
Income Agreement by and between United Bank and George W. Jones
(1)
|
|
10.9
|
Directors
Fee Continuation Plan (1)
|
|
10.10
|
Form
of Employment Agreement by and between United Bank and Richard B.
Collins
(1)
|
|
10.11
|
Form
of Change in Control Agreement by and between United Bank and certain
executive officers (1)
|
|
10.12
|
United
Bank 2006 Stock-Based Incentive Plan
(2)
|
11
Statement
Regarding Computation of Per Share Earnings
|
21
|
Subsidiaries
of Registrant (1)
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
32.1
|
Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
|
|
32.2
|
Certification
of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
|
_______________________
(1) Incorporated
by reference to the Registration Statement on Form S-1 of United Financial
Bancorp, Inc. (file no. 333-123371), originally filed with the Securities and
Exchange Commission on March 16, 2005.
(2)
Incorporated
by reference to Appendix B of the Registrant's definitive Proxy Statement for
the Company's 2006 Annual Meeting filed with the Securities and Exchange
Commission on June 12, 2006.
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
has
duly caused this report to be signed by the undersigned thereunto duly
authorized.
|
|
|
United
Financial Bancorp, Inc.
|
|
|
|
|
|
|
|
|
|
|
Date:
|
August
9, 2006
|
|
By:
|
/s/
Richard B. Collins
|
|
|
|
|
Richard
B. Collins
|
|
|
|
|
President
and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
Date:
|
August
9, 2006
|
|
By:
|
s/
Mark A. Roberts
|
|
|
|
|
Mark
A. Roberts
|
|
|
|
|
Executive
Vice President and Chief Financial
Officer
|
24