UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
(Mark
One)
|
|
|
|
|
|
ý
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Quarterly
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
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|
For
the quarterly period ended June 30, 2008
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 000-1405049
United Financial Bancorp,
Inc.
(Exact
name of registrant as specified in its charter)
Maryland
|
74-3242562
|
(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 x No
¨.
Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definition of “accelerated filer”, “large accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large
accelerated filer ¨
|
Accelerated
filer x
|
Non-accelerated
filer ¨
|
Smaller
reporting company ¨
|
Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ¨ No
x.
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
17,763,747
shares outstanding as of August 8, 2008
United
Financial Bancorp, Inc.
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33
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34
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Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
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35
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Certification
of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
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36
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Statement
of Chief Executive Officer Furnished Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
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37
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Statement
of Chief Financial Officer Furnished Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
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38
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PART
I. FINANCIAL INFORMATION
ITEM
1. Consolidated Financial Statements
UNITED FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF CONDITION
(Dollars
in thousands, except per share amounts)
|
|
June
30,
|
|
|
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and due from banks
|
|
$ |
16,499 |
|
|
$ |
14,219 |
|
Interest-bearing
deposits
|
|
|
619 |
|
|
|
35 |
|
Total
cash and cash equivalents
|
|
|
17,118 |
|
|
|
14,254 |
|
|
|
|
|
|
|
|
|
|
Short-term
investments
|
|
|
1,055 |
|
|
|
1,030 |
|
Securities
available for sale, at fair value
|
|
|
292,684 |
|
|
|
201,257 |
|
Securities
to be held to maturity, at amortized cost (fair value $3,583
at
|
|
|
|
|
|
|
|
|
June
30, 2008 and $3,631 at December 31, 2007)
|
|
|
3,603 |
|
|
|
3,632 |
|
Loans,
net of allowance for loan losses of $8,162 at June 30, 2008
and
|
|
|
|
|
|
|
|
|
$7,714
at December 31, 2007
|
|
|
852,157 |
|
|
|
819,117 |
|
Other
real estate owned
|
|
|
630 |
|
|
|
880 |
|
Accrued
interest receivable
|
|
|
4,624 |
|
|
|
4,477 |
|
Deferred
tax asset, net
|
|
|
8,765 |
|
|
|
4,953 |
|
Stock
in the Federal Home Loan Bank of Boston
|
|
|
10,257 |
|
|
|
10,257 |
|
Banking
premises and equipment, net
|
|
|
12,087 |
|
|
|
10,600 |
|
Bank-owned
life insurance
|
|
|
6,945 |
|
|
|
6,652 |
|
Other
assets
|
|
|
4,281 |
|
|
|
2,172 |
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$ |
1,214,206 |
|
|
$ |
1,079,281 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
Interest-bearing
|
|
$ |
662,892 |
|
|
$ |
616,672 |
|
Non-interest-bearing
|
|
|
111,815 |
|
|
|
102,010 |
|
Total
deposits
|
|
|
774,707 |
|
|
|
718,682 |
|
Federal
Home Loan Bank of Boston advances
|
|
|
190,389 |
|
|
|
107,997 |
|
Repurchase
agreements
|
|
|
8,963 |
|
|
|
13,864 |
|
Escrow
funds held for borrowers
|
|
|
1,324 |
|
|
|
1,356 |
|
Capitalized
lease obligations
|
|
|
3,169 |
|
|
|
1,890 |
|
Due
to broker
|
|
|
2,829 |
|
|
|
- |
|
Accrued
expenses and other liabilities
|
|
|
6,199 |
|
|
|
9,372 |
|
Total
liabilities
|
|
|
987,580 |
|
|
|
853,161 |
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
|
Preferred
stock, par value $0.01 per share, authorized 50,000,000
shares;
|
|
|
|
|
|
|
|
|
none
issued
|
|
|
- |
|
|
|
- |
|
Common
stock, par value $0.01 per share, authorized 100,000,000
shares;
|
|
|
|
|
|
|
|
|
17,763,747
shares issued at June 30, 2008 and December 31, 2007
|
|
|
178 |
|
|
|
178 |
|
Paid-in
capital
|
|
|
166,171 |
|
|
|
165,920 |
|
Retained
earnings
|
|
|
74,858 |
|
|
|
73,026 |
|
Unearned
compensation
|
|
|
(12,486 |
) |
|
|
(12,835 |
) |
Accumulated
other comprehensive loss, net of taxes
|
|
|
(2,095 |
) |
|
|
(169 |
) |
Total
stockholders’ equity
|
|
|
226,626 |
|
|
|
226,120 |
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$ |
1,214,206 |
|
|
$ |
1,079,281 |
|
|
|
|
|
|
|
|
|
|
See notes
to unaudited consolidated financial statements
UNITED
FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF OPERATIONS (unaudited)
(Dollars
in thousands, except per share amounts)
|
|
Three
Months Ended
|
|
|
Six
Months Ended
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Interest
and dividend income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$ |
12,295 |
|
|
$ |
12,350 |
|
|
$ |
24,842 |
|
|
$ |
24,305 |
|
Investments
|
|
|
3,560 |
|
|
|
1,850 |
|
|
|
6,178 |
|
|
|
3,832 |
|
Other
interest-earning assets
|
|
|
118 |
|
|
|
313 |
|
|
|
359 |
|
|
|
688 |
|
Total
interest and dividend income
|
|
|
15,973 |
|
|
|
14,513 |
|
|
|
31,379 |
|
|
|
28,825 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
4,359 |
|
|
|
5,477 |
|
|
|
9,332 |
|
|
|
10,658 |
|
Borrowings
|
|
|
1,706 |
|
|
|
1,901 |
|
|
|
3,108 |
|
|
|
4,076 |
|
Total
interest expense
|
|
|
6,065 |
|
|
|
7,378 |
|
|
|
12,440 |
|
|
|
14,734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income before provision for loan losses
|
|
|
9,908 |
|
|
|
7,135 |
|
|
|
18,939 |
|
|
|
14,091 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for loan losses
|
|
|
651 |
|
|
|
320 |
|
|
|
835 |
|
|
|
604 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income after provision for loan losses
|
|
|
9,257 |
|
|
|
6,815 |
|
|
|
18,104 |
|
|
|
13,487 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fee
income on depositors’ accounts
|
|
|
1,156 |
|
|
|
1,097 |
|
|
|
2,233 |
|
|
|
2,135 |
|
Net
(loss) gain on sale of securities
|
|
|
- |
|
|
|
(43 |
) |
|
|
8 |
|
|
|
(29 |
) |
Wealth
management income
|
|
|
136 |
|
|
|
170 |
|
|
|
286 |
|
|
|
291 |
|
Other
income
|
|
|
282 |
|
|
|
211 |
|
|
|
566 |
|
|
|
436 |
|
Total
non-interest income
|
|
|
1,574 |
|
|
|
1,435 |
|
|
|
3,093 |
|
|
|
2,833 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and benefits
|
|
|
4,199 |
|
|
|
3,735 |
|
|
|
8,240 |
|
|
|
7,573 |
|
Occupancy
expenses
|
|
|
578 |
|
|
|
481 |
|
|
|
1,087 |
|
|
|
972 |
|
Marketing
expenses
|
|
|
441 |
|
|
|
449 |
|
|
|
799 |
|
|
|
771 |
|
Data
processing expenses
|
|
|
815 |
|
|
|
653 |
|
|
|
1,534 |
|
|
|
1,295 |
|
Professional
fees
|
|
|
372 |
|
|
|
263 |
|
|
|
815 |
|
|
|
652 |
|
Other
expenses
|
|
|
1,145 |
|
|
|
994 |
|
|
|
2,251 |
|
|
|
1,959 |
|
Total
non-interest expense
|
|
|
7,550 |
|
|
|
6,575 |
|
|
|
14,726 |
|
|
|
13,222 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
3,281 |
|
|
|
1,675 |
|
|
|
6,471 |
|
|
|
3,098 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax expense
|
|
|
1,272 |
|
|
|
697 |
|
|
|
2,496 |
|
|
|
1,286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
2,009 |
|
|
$ |
978 |
|
|
$ |
3,975 |
|
|
$ |
1,812 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.12 |
|
|
$ |
0.06 |
|
|
$ |
0.24 |
|
|
$ |
0.11 |
|
Diluted
|
|
$ |
0.12 |
|
|
$ |
0.06 |
|
|
$ |
0.24 |
|
|
$ |
0.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
16,248,424 |
|
|
|
16,888,326 |
|
|
|
16,239,635 |
|
|
|
16,912,764 |
|
Diluted
|
|
|
16,336,409 |
|
|
|
16,975,157 |
|
|
|
16,303,907 |
|
|
|
16,987,144 |
|
See notes to unaudited consolidated
financial statements.
UNITED
FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)
FOR
THE SIX MONTHS ENDED JUNE 30, 2008 and
2007
|
(Dollars
in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Shares
|
|
|
Common
|
|
|
Paid-In
|
|
|
Retained
|
|
|
Unearned
|
|
|
Treasury
|
|
|
Comprehensive
|
|
|
|
|
|
|
Outstanding
|
|
|
Stock
|
|
|
Capital
|
|
|
Earnings
|
|
|
Compensation
|
|
|
Stock
|
|
|
Loss
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances
at December 31, 2006
|
|
|
17,154,550 |
|
|
$ |
172 |
|
|
$ |
75,520 |
|
|
$ |
70,406 |
|
|
$ |
(5,772 |
) |
|
$ |
(664 |
) |
|
$ |
(1,951 |
) |
|
$ |
137,711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,812 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,812 |
|
Other
comprehensive loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(239 |
) |
|
|
(239 |
) |
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
dividends paid ($0.12 per share)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(881 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(881 |
) |
Treasury
stock purchases
|
|
|
(82,697 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,209 |
) |
|
|
- |
|
|
|
(1,209 |
) |
Stock-based
compensation
|
|
|
- |
|
|
|
- |
|
|
|
1,077 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,077 |
|
ESOP
shares committed to be released
|
|
|
- |
|
|
|
- |
|
|
|
103 |
|
|
|
- |
|
|
|
222 |
|
|
|
- |
|
|
|
- |
|
|
|
325 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances
at June 30, 2007
|
|
|
17,071,853 |
|
|
$ |
172 |
|
|
$ |
76,700 |
|
|
$ |
71,337 |
|
|
$ |
(5,550 |
) |
|
$ |
(1,873 |
) |
|
$ |
(2,190 |
) |
|
$ |
138,596 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances
at December 31, 2007
|
|
|
17,763,747 |
|
|
$ |
178 |
|
|
$ |
165,920 |
|
|
$ |
73,026 |
|
|
$ |
(12,835 |
) |
|
$ |
- |
|
|
$ |
(169 |
) |
|
$ |
226,120 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,975 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,975 |
|
Other
comprehensive loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,926 |
) |
|
|
(1,926 |
) |
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,049 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
costs from issuance of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
pursuant
to second-step conversion
|
|
|
- |
|
|
|
- |
|
|
|
(26 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(26 |
) |
Repurchase
of stock to fund the 2008 Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
Plan
|
|
|
- |
|
|
|
- |
|
|
|
(537 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(537 |
) |
Cash
dividends paid ($0.13 per share)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,143 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,143 |
) |
Stock-based
compensation
|
|
|
- |
|
|
|
- |
|
|
|
761 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
761 |
|
ESOP
shares committed to be released
|
|
|
- |
|
|
|
- |
|
|
|
53 |
|
|
|
- |
|
|
|
349 |
|
|
|
- |
|
|
|
- |
|
|
|
402 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances
at June 30, 2008
|
|
|
17,763,747 |
|
|
$ |
178 |
|
|
$ |
166,171 |
|
|
$ |
74,858 |
|
|
$ |
(12,486 |
) |
|
$ |
- |
|
|
$ |
(2,095 |
) |
|
$ |
226,626 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
components of comprehensive loss and related tax effects are as
follows:
|
|
Six
Months Ended June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
Change
in unrealized holding losses on available-for-sale
securities
|
|
$ |
(3,194 |
) |
|
$ |
(385 |
) |
Reclassification
adjustment for (gains) losses realized in income
|
|
|
(8 |
) |
|
|
29 |
|
Net
change in unrealized losses
|
|
|
(3,202 |
) |
|
|
(356 |
) |
|
|
|
|
|
|
|
|
|
Tax
effect
|
|
|
(1,276 |
) |
|
|
(117 |
) |
|
|
|
|
|
|
|
|
|
Other
comprehensive loss
|
|
$ |
(1,926 |
) |
|
$ |
(239 |
) |
|
|
|
|
|
|
|
|
|
See notes to unaudited consolidated
financial statements.
UNITED
FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF CASH FLOWS (unaudited)
FOR THE
SIX MONTHS ENDED JUNE 30, 2008 and 2007
|
|
2008
|
|
|
2007
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
income
|
|
$ |
3,975 |
|
|
$ |
1,812 |
|
Adjustments
to reconcile net income to net cash provided by (used in)
operating
|
|
|
|
|
|
|
|
|
activities:
|
|
|
|
|
|
|
|
|
Provision
for loan losses
|
|
|
835 |
|
|
|
604 |
|
ESOP
expense
|
|
|
402 |
|
|
|
325 |
|
Stock-based
compensation
|
|
|
761 |
|
|
|
1,077 |
|
Amortization
of premiums and discounts
|
|
|
73 |
|
|
|
64 |
|
Depreciation
and amortization
|
|
|
406 |
|
|
|
442 |
|
Amortization
of intangible assets
|
|
|
15 |
|
|
|
15 |
|
Net
loss (gain) on sale of other real estate owned
|
|
|
9 |
|
|
|
(14 |
) |
Net
(gain) loss on sale of securities
|
|
|
(8 |
) |
|
|
29 |
|
Net
loss on sale of loans
|
|
|
- |
|
|
|
5 |
|
Increase
in cash surrender value of bank-owned life insurance
|
|
|
(293 |
) |
|
|
(211 |
) |
(Increase)
decrease in accrued interest receivable
|
|
|
(147 |
) |
|
|
25 |
|
Increase
in other assets
|
|
|
(4,660 |
) |
|
|
(490 |
) |
Decrease
in accrued expenses and other liabilities
|
|
|
(2,670 |
) |
|
|
(1,820 |
) |
Net
cash (used in) provided by operating activities
|
|
|
(1,302 |
) |
|
|
1,863 |
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchases
of securities available for sale
|
|
|
(167,496 |
) |
|
|
(21,947 |
) |
Proceeds
from sales of securities available for sale
|
|
|
28,407 |
|
|
|
5,424 |
|
Proceeds
from maturities, calls and principal repayments of securities available
for sale
|
|
|
46,871 |
|
|
|
45,146 |
|
Purchases
of securities held to maturity
|
|
|
- |
|
|
|
(675 |
) |
Proceeds
from maturities, calls and principal repayments of securities
held to maturity
|
|
|
25 |
|
|
|
225 |
|
Investment
in short term time deposits
|
|
|
(25 |
) |
|
|
(1,004 |
) |
Purchases
of Federal Home Loan Bank of Boston stock
|
|
|
- |
|
|
|
(611 |
) |
Proceeds
from sales of other real estate owned
|
|
|
391 |
|
|
|
576 |
|
Net
loan originations and principal repayments
|
|
|
(34,025 |
) |
|
|
(43,545 |
) |
Proceeds
from sales of loans
|
|
|
- |
|
|
|
1,881 |
|
Purchases
of property and equipment
|
|
|
(579 |
) |
|
|
(298 |
) |
Cash
paid to acquire Levine Financial Group
|
|
|
(82 |
) |
|
|
(55 |
) |
Net
cash used in investing activities
|
|
|
(126,513 |
) |
|
|
(14,883 |
) |
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Net
increase in deposits
|
|
|
56,025 |
|
|
|
40,067 |
|
Increase
(decrease) in short term borrowings
|
|
|
53,145 |
|
|
|
(17,000 |
) |
Proceeds
of Federal Home Loan Bank of Boston long term advances
|
|
|
45,000 |
|
|
|
15,000 |
|
Repayments
of Federal Home Loan Bank of Boston long term advances
|
|
|
(15,753 |
) |
|
|
(25,287 |
) |
Net
decrease in repurchase agreements
|
|
|
(4,901 |
) |
|
|
(2,435 |
) |
Net
decrease in escrow funds held for borrowers
|
|
|
(32 |
) |
|
|
(8 |
) |
Repurchases
of common stock to fund the 2008 Equity Incentive Plan
|
|
|
(537 |
) |
|
|
- |
|
Treasury
stock purchases
|
|
|
- |
|
|
|
(1,209 |
) |
Cash
dividends paid
|
|
|
(2,143 |
) |
|
|
(881 |
) |
Costs
from issuance of common stock pursuant to second-step
conversion
|
|
|
(26 |
) |
|
|
- |
|
Payments
on capitalized lease obligations
|
|
|
(99 |
) |
|
|
(85 |
) |
Net
cash provided by financing activities
|
|
|
130,679 |
|
|
|
8,162 |
|
Increase
(decrease) in cash and cash equivalents
|
|
|
2,864 |
|
|
|
(4,858 |
) |
Cash
and cash equivalents at beginning of period
|
|
|
14,254 |
|
|
|
25,419 |
|
Cash
and cash equivalents at end of period
|
|
$ |
17,118 |
|
|
$ |
20,561 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosure of Cash Flow Information:
|
|
|
|
|
|
|
|
|
Cash
paid during the period:
|
|
|
|
|
|
|
|
|
Interest
on deposits, borrowings and other interest bearing
liabilities
|
|
$ |
12,400 |
|
|
$ |
14,854 |
|
Income
taxes – net
|
|
|
8,330 |
|
|
|
2,463 |
|
Non-cash
items:
|
|
|
|
|
|
|
|
|
Capitalized
lease asset and obligations
|
|
$ |
1,308 |
|
|
$ |
1,932 |
|
Transfer
of loans to other real estate owned
|
|
|
150 |
|
|
|
- |
|
Trade
date accounting for securities purchased
|
|
|
2,471 |
|
|
|
- |
|
See notes to unaudited consolidated
financial statements.
UNITED
FINANCIAL BANCORP, INC. AND SUBSIDIARY
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2008
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
(“GAAP”) 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, 2008 and the results of operations for the three and
six months ended June 30, 2008 and 2007. 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, 2007 included in the Company’s Annual Report on Form 10-K,
which was filed by the Company with the Securities and Exchange Commission on
March 17, 2008 and amended on April 29, 2008.
Amounts
reported for prior periods are reclassified as necessary to conform to the
current period presentation.
NOTE
B – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In
June 2006, the
EITF released Issue 06-4, “Accounting for
Deferred Compensation and Postretirement Benefit Aspects of Endorsement
Split-Dollar Life Insurance Arrangements”. EITF 06-4 addresses accounting for
split-dollar life insurance arrangements whereby the employer purchases a policy
to insure the life of an employee, and separately enters into an agreement to
split the policy benefits between the employer and the employee. This EITF
states that an obligation arises as a result of a substantive agreement with an
employee to provide future postretirement benefits. Under EITF 06-4, the
obligation is not settled upon entering into an insurance arrangement. Since the
obligation is not settled, a liability should be recognized in accordance with
applicable authoritative guidance. EITF 06-4 is effective for fiscal years
beginning after December 15, 2007. The adoption of this Interpretation as of
January 1, 2008, had no material impact on the Company’s financial condition or
results of operations.
In March
2007, the FASB ratified EITF Issue No. 06-10, “Accounting for Collateral
Assignment Split-Dollar Life Insurance Agreements,” which provides guidance for
determining a liability for the postretirement benefit obligation as well as
recognition and measurement of the associated asset on the basis of the terms of
the collateral assignment agreement. EITF 06-10 is effective for fiscal years
beginning after December 15, 2007. The adoption of this Interpretation as of
January 1, 2008, had no material effect on the Company’s results of operations
or financial condition.
In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. SFAS
157 defines fair value, establishes a U.S. GAAP framework for measuring fair
value, and expands financial statement disclosures about fair value
measurements. The Company adopted SFAS No.157 on January 1, 2008 (see Note L).
The adoption of this Standard had no material effect on the Company’s results of
operations or financial condition.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” ("SFAS 159"), which provides
companies with an option to report selected financial assets and liabilities at
fair value. The objective of SFAS 159 is to reduce both complexity in accounting
for financial instruments and the volatility in earnings caused by measuring
related assets and liabilities differently. SFAS 159 establishes presentation
and disclosure requirements designed to facilitate comparisons between companies
that choose different measurement attributes for similar types of assets and
liabilities and to more easily understand the effect of the company’s choice to
use fair value on its earnings. SFAS 159 also requires entities to display the
fair value of the selected assets and liabilities on the face of the balance
sheet. SFAS 159 does not eliminate disclosure requirements of other accounting
standards, including fair value measurement disclosures in SFAS 157. The Company
did not elect fair value treatment for any financial assets or liabilities upon
the adoption of this Standard at January 1, 2008.
In
December 2007, the FASB issued proposed FASB Staff Position (“FSP”) 157-b,
“Effective Date of FASB Statement No. 157,” which would permit a one-year
deferral in applying the measurement provisions of SFAS No. 157 to
non-financial assets and non-financial liabilities (non-financial items) that
are not recognized or disclosed at fair value in an entity’s financial
statements on a recurring basis (at least annually). Therefore, if the change in
fair value of a non-financial item is not required to be recognized or disclosed
in the financial statements on an annual basis or more frequently, the effective
date of application of SFAS No. 157 to that item is deferred until fiscal
years beginning after November 15, 2008. This deferral would not apply,
however, to an entity that applies SFAS No. 157 in interim or annual
financial statements before proposed FSP 157-b is finalized. In February 2008,
the FASB finalized the provisions of proposed FSP 157-b, issuing FSP 157-2 as
authoritative guidance. The Company is currently evaluating the impact, if any,
that the adoption of FSP 157-2 will have on its Consolidated Financial
Statements.
NOTE
C – 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
D – 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 are adjusted to exclude the weighted average number of unallocated shares
held by the ESOP and unvested restricted stock awards. Diluted earnings per
share have been calculated by dividing net income by weighted average shares
outstanding after giving effect to the potential dilution that could occur if
potential common shares were converted into common stock using the treasury
stock method.
The
calculation of basic and diluted earnings per common share for the periods
indicated is presented below.
|
|
Three
Months Ended June 30,
|
|
|
Six
Months Ended June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Net
income
|
|
$ |
2,009 |
|
|
$ |
978 |
|
|
$ |
3,975 |
|
|
$ |
1,812 |
|
Weighted
average common shares applicable to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic EPS (1,
4)
|
|
|
16,248,424 |
|
|
|
16,888,326 |
|
|
|
16,239,635 |
|
|
|
16,912,764 |
|
Effect of dilutive potential
common shares (2, 3)
|
|
|
87,985 |
|
|
|
86,831 |
|
|
|
64,272 |
|
|
|
74,380 |
|
Weighted
average common shares applicable to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
diluted
EPS
|
|
|
16,336,409 |
|
|
|
16,975,157 |
|
|
|
16,303,907 |
|
|
|
16,987,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.12 |
|
|
$ |
0.06 |
|
|
$ |
0.24 |
|
|
$ |
0.11 |
|
Diluted
|
|
$ |
0.12 |
|
|
$ |
0.06 |
|
|
$ |
0.24 |
|
|
$ |
0.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) In
December 2007, the Company completed a second step conversion and offering
in which each outstanding minority share
|
|
was exchanged for 1.04079 shares and 9,564,570 shares were sold in
a subscription and syndicate offering. All share data in
|
|
prior periods have been adjusted by the exhange ratio.
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) For
the six months ended June 30, 2008 and June 30, 2007, options to purchase
1,557,698 and 778,510 shares, respectively,
|
|
were outstanding but not included in the computation of earnings per share
because they were antidilutive.
|
|
(3) Includes
incremental shares related to stock options and restricted
stock.
|
|
|
|
|
|
|
|
|
|
(4) Includes
shares repurchased in June 2008 to fund the 2008 Equity Incentive
Plan.
|
|
|
|
|
|
NOTE
E – STOCK-BASED INCENTIVE PLAN
The
Company’s 2008 Equity Incentive Plan (the “Incentive Plan”) was approved by the
shareholders at its Annual Meeting held on June 10, 2008. The Incentive Plan
will remain in effect for a period of ten years and authorizes the issuance of
up to 1,258,534 shares of Company common stock pursuant to grants of restricted
stock awards, restricted stock unit awards, incentive stock options,
non-statutory stock options and stock appreciation rights; provided, however,
that no more than 898,953 shares may be issued or delivered in the aggregate
pursuant to the exercise of stock options or stock appreciation rights, and no
more than 359,581 shares may be issued or delivered pursuant to restricted stock
awards or restricted stock unit awards. Employees and outside directors of the
Company are eligible to receive awards under the Incentive Plan. The holders of
restricted stock awards also have full voting rights beginning on the grant
date. Upon the occurrence of an event constituting a change in
control of the Company, as defined in the Incentive Plan, all stock options will
become fully vested, and all stock awards then outstanding will vest free of
restrictions.
Under the
Incentive Plan, stock options are granted at an exercise price equal to the fair
value of the underlying shares at the date of grant and have a contractual life
of ten years. Stock options vest based on continued service with the
Company over the five year period following the grant date. The compensation
cost related to stock options is based upon the fair value for each option as of
the date of the grant determined using the Black-Scholes option pricing model.
The Black-Scholes model requires the Company to provide estimates of the
expected term, volatility of the underlying stock, the stock’s dividend yield
and the discount rate.
The
compensation cost related to restricted stock awards is based upon the Company’s
stock price at the grant date. Restricted stock awards vest based upon
continuous service with the Company over the five-year period following the
grant date. During the vesting period, participants are entitled to dividends
for all awards.
The
Company’s 2008 Incentive Plan is described more fully in the Company’s Proxy
Statement for its 2008 Annual Meeting filed with the Securities and Exchange
Commission on April 29, 2008.
A
combined summary of activity in the Company’s incentive plans for the six months
ended June 30, 2008 is presented in the following table:
|
|
|
|
|
Stock
Awards Outstanding
|
|
|
Stock
Options Outstanding
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
Weighted-
|
|
|
|
Shares
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Available
|
|
|
Number
of
|
|
|
Grant
|
|
|
Number
of
|
|
|
Exercise
|
|
|
|
for
Grant
|
|
|
Shares
|
|
|
Price
|
|
|
Shares
|
|
|
Price
|
|
Balance
at December 31, 2007
|
|
|
140,850 |
|
|
|
233,970 |
|
|
$ |
12.35 |
|
|
|
785,275 |
|
|
$ |
12.36 |
|
New
Incentive Plan
|
|
|
1,258,534 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Granted
|
|
|
(1,068,500 |
) |
|
|
313,500 |
|
|
|
11.66 |
|
|
|
779,500 |
|
|
|
11.55 |
|
Stock
options exercised
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Shares
vested
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Forfeited
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(7,077 |
) |
|
|
11.66 |
|
Cancelled
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at June 30, 2008
|
|
|
330,884 |
|
|
|
547,470 |
|
|
$ |
11.95 |
|
|
|
1,557,698 |
|
|
$ |
11.96 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On June
19, 2008, the Company granted 755,000 stock options and 313,500 restricted
shares to certain directors and employees under the 2008 equity incentive plan.
The stock options had a weighted average fair value of $2.57 per share, with a
total grant date fair value of $1.9 million. The restricted shares had a
weighted average value of $11.66 per share, with a total grant date fair value
of $3.7 million. In 2008, the Company also granted 24,500 stock options to
certain employees. The stock options had a weighted average fair value of $2.39
and a grant date fair value of $59,000. In 2007, the Company granted 6,765 stock
options with a weighted average value of $3.21 and a total grant date fair value
of $21. No new restricted shares were granted in 2007. At June 30, 2008 the
Company has 94,725 restricted shares and 236,159 stock options available for
grant under the incentive plans.
Stock-based
compensation expense totaled $761,000 during the six months ended June 30,
2008. Stock-based compensation expense is recognized ratably over the requisite
service period for all awards. Unrecognized stock-based compensation expense
related to stock options totaled $3.3 million at June 30, 2008. At such date,
the weighted-average period over which this unrecognized expense is expected to
be recognized was 3.7 years. Unrecognized stock-based compensation expense
related to non-vested stock awards was $5.5 million at June 30, 2008. At
such date, the weighted-average period over which this unrecognized expense was
expected to be recognized was 3.7 years.
The
following table presents the assumptions used to compute the fair value of
options using the Black-Scholes option pricing model for stock options granted
on June 19, 2008.
|
|
|
|
Weighted
average fair value
|
|
$ |
2.57 |
|
Expected
term
|
|
6.50
years
|
|
Volatility
|
|
|
19.30 |
% |
Expected
dividend yield
|
|
|
1.88 |
% |
Risk-free
interest rate
|
|
|
3.89 |
% |
A summary
of stock options outstanding and exercisable at June 30, 2008 is as
follows:
|
|
Stock
Options
|
|
|
|
Outstanding
|
|
|
Exercisable
|
|
|
|
|
|
|
|
|
Total
number of shares
|
|
|
1,557,698 |
|
|
|
181,962 |
|
Weighted
average exercise price
|
|
$ |
11.96 |
|
|
$ |
12.36 |
|
Aggregate
intrinsic value
|
|
$ |
- |
|
|
$ |
- |
|
Weighted
average remaining contractual term
|
|
9.0
years
|
|
|
8.1
years
|
|
NOTE
F – LOANS
The
components of loans were as follows at June 30, 2008 and December 31,
2007:
|
|
June
30,
|
|
|
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
One-to-four
family residential real estate
|
|
$ |
357,103 |
|
|
$ |
339,470 |
|
Commercial
real estate
|
|
|
232,669 |
|
|
|
214,776 |
|
Construction
|
|
|
37,312 |
|
|
|
42,059 |
|
Home
equity
|
|
|
117,422 |
|
|
|
116,241 |
|
Commercial
and industrial
|
|
|
83,918 |
|
|
|
81,562 |
|
Automobile
|
|
|
20,093 |
|
|
|
22,461 |
|
Consumer
|
|
|
9,517 |
|
|
|
8,126 |
|
Total
loans
|
|
|
858,034 |
|
|
|
824,695 |
|
|
|
|
|
|
|
|
|
|
Net
deferred loan costs and fees
|
|
|
2,285 |
|
|
|
2,136 |
|
Allowance
for loan losses
|
|
|
(8,162 |
) |
|
|
(7,714 |
) |
Loans,
net
|
|
$ |
852,157 |
|
|
$ |
819,117 |
|
NOTE
G – NON-PERFORMING ASSETS
The table
below sets forth the amounts and categories of non-performing assets at the
dates indicated.
|
|
June
30,
|
|
|
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
Non-accrual
loans:
|
|
|
|
|
|
|
Residential
mortgages
|
|
$ |
1,500 |
|
|
$ |
328 |
|
Commercial
mortgages
|
|
|
1,404 |
|
|
|
553 |
|
Construction
|
|
|
800 |
|
|
|
577 |
|
Home
equity
|
|
|
75 |
|
|
|
52 |
|
Commercial
and industrial
|
|
|
307 |
|
|
|
275 |
|
Automobile
|
|
|
- |
|
|
|
- |
|
Other
consumer
|
|
|
49 |
|
|
|
- |
|
Total
non-accrual loans
|
|
|
4,135 |
|
|
|
1,785 |
|
|
|
|
|
|
|
|
|
|
Accruing
loans 90 days or more past due
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Total
non-performing loans
|
|
|
4,135 |
|
|
|
1,785 |
|
|
|
|
|
|
|
|
|
|
Other
real estate owned
|
|
|
630 |
|
|
|
880 |
|
Total
non-performing assets
|
|
$ |
4,765 |
|
|
$ |
2,665 |
|
|
|
|
|
|
|
|
|
|
Ratios:
|
|
|
|
|
|
|
|
|
Total
non-performing loans to total loans
|
|
|
0.48 |
% |
|
|
0.22 |
% |
Total
non-performing assets to total assets
|
|
|
0.39 |
% |
|
|
0.25 |
% |
NOTE
H – 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,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
Balance
at beginning of period
|
|
$ |
7,714 |
|
|
$ |
7,218 |
|
Provision
for loan losses
|
|
|
835 |
|
|
|
604 |
|
Charge-offs
|
|
|
(397 |
) |
|
|
(107 |
) |
Recoveries
|
|
|
10 |
|
|
|
6 |
|
Balance
at end of period
|
|
$ |
8,162 |
|
|
$ |
7,721 |
|
|
|
|
|
|
|
|
|
|
Ratios:
|
|
|
|
|
|
|
|
|
Net
charge-offs to average loans
|
|
|
|
|
|
|
|
|
outstanding
(annualized)
|
|
|
0.09 |
% |
|
|
0.03 |
% |
Allowance
for loan losses to non-performing
|
|
|
|
|
|
|
|
|
loans
at end of period
|
|
|
197.39 |
% |
|
|
259.79 |
% |
Allowance
for loan losses to total
|
|
|
|
|
|
|
|
|
loans
at end of period
|
|
|
0.95 |
% |
|
|
0.96 |
% |
|
|
|
|
|
|
|
|
|
NOTE
I – COMMITMENTS
Financial
instruments with off-balance sheet risk at June 30, 2008 and December 31, 2007
were as follows:
|
|
|
|
|
|
|
|
|
June
30,
|
|
|
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
Unused
lines of credit
|
|
$ |
150,387 |
|
|
$ |
146,579 |
|
Amounts
due mortgagors
|
|
|
24,098 |
|
|
|
31,168 |
|
Standby
letters of credit
|
|
|
863 |
|
|
|
1,627 |
|
Commitments
to originate loans
|
|
|
10,677 |
|
|
|
15,890 |
|
NOTE
J – DEPOSITS
Deposit accounts, by type, are
summarized as follows at June 30, 2008 and December 31,
2007:
|
|
June
30,
|
|
|
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
Demand
|
|
$ |
111,815 |
|
|
$ |
102,010 |
|
NOW
|
|
|
38,783 |
|
|
|
35,207 |
|
Regular
savings
|
|
|
88,230 |
|
|
|
65,711 |
|
Money
market
|
|
|
167,115 |
|
|
|
168,107 |
|
Certificates
of deposit
|
|
|
368,764 |
|
|
|
347,647 |
|
|
|
$ |
774,707 |
|
|
$ |
718,682 |
|
NOTE
K – 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 Company’s financial condition, results of
operations or cash flows.
NOTE L -
FAIR VALUES OF ASSETS AND LIABILITIES
Effective
January 1, 2008, the Company adopted Statement of Financial Accounting Standards
No. 157 (“SFAS 157”), “Fair Value Measurements”, which provides a framework for
measuring fair value under generally accepted accounting
principles.
The
Company also adopted SFAS No. 159, “The Fair Value Option for Financial Assets
and Financial Liabilities, including an amendment of FASB Statement No. 115”.
SFAS 159 allows an entity the irrevocable option to elect fair value for the
initial and subsequent measurement for certain financial assets and liabilities
on a contract-by-contract basis. The Company did not elect fair value treatment
for any financial assets or liabilities upon adoption.
In
accordance with SFAS 157, the Company groups its financial assets and financial
liabilities measured at fair value in three levels, based on the markets in
which the assets and liabilities are traded and the reliability of the
assumptions used to determine fair value, as follows:
Level 1 –
Valuations for assets and liabilities traded in active exchange markets, such as
the New York Stock Exchange. Level 1 also includes U.S. Treasury and other U.S.
government and agency mortgage-backed securities that are traded by dealers or
brokers in active markets. Valuations are obtained from readily
available pricing sources for market transactions involving identical assets or
liabilities.
Level 2 –
Valuations for assets and liabilities traded in less active dealer or broker
markets. Valuations are obtained from third party pricing services for identical
or comparable assets or liabilities.
Level 3 –
Valuations for assets and liabilities that are derived from other valuation
methodologies, including option pricing models, discounted cash flow models and
similar techniques, and not based on market exchange, dealer, or broker-traded
transactions. Level 3 valuations incorporate certain assumptions and
projections in determining the fair value assigned to such assets and
liabilities.
Assets
and liabilities measured at fair value on a recurring basis, are summarized
below:
|
|
At
June 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets/Liabilities
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
at
Fair Value
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
available for sale
|
|
$ |
282,284 |
|
|
$ |
10,400 |
|
|
$ |
- |
|
|
$ |
292,684 |
|
Mortgage
servicing rights
|
|
|
- |
|
|
|
- |
|
|
|
129 |
|
|
|
129 |
|
Total
assets
|
|
$ |
282,284 |
|
|
$ |
10,400 |
|
|
$ |
129 |
|
|
$ |
292,813 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table
below presents the changes in Level 3 assets and liabilities measured at fair
value on a recurring basis.
Balance
as of January 1, 2008
|
|
$ |
136 |
|
Total
realized/unrealized gains (losses) included in net income
|
|
|
(7 |
) |
Purchases,
sales, issuances and settlements
|
|
|
- |
|
Transfers
in and out of Level 3
|
|
|
- |
|
Balance
as of June 30, 2008
|
|
$ |
129 |
|
|
|
|
|
|
The fair
value of a financial instrument is the amount at which the instrument could be
exchanged in a current transaction between willing parties, other than in a
forced or liquidation sale. If a quoted market price is available for an
instrument, the fair value to be disclosed for that instrument is the product of
the number of trading units of the instrument times that market
price.
Also, the
Company may be required, from time to time, to measure certain other financial
assets on a nonrecurring basis in accordance with GAAP. These adjustments to
fair value usually result from application of lower-of-cost-or-fair value
accounting or write-downs of individual assets.
NOTE M -
INCOME TAXES
The
Internal Revenue Service (“IRS”) commenced an examination of the Company’s 2005
and 2006 federal income tax returns in the second quarter of
2007. During the quarter ended March 31, 2008, the IRS proposed
certain adjustments challenging the methodology used by the Company to estimate
the fair market value of its residential mortgage portfolio under Internal
Revenue Code (“IRC”) Sec. 475.
The
change in fair value calculated under IRC Sec. 475 is considered a temporary
difference in the Company’s FAS109 deferred income tax calculations. In
accordance with FASB Interpretation (FIN) No. 48 “Accounting for Uncertainty in
Income Taxes”, the Company determined in the first quarter of 2008 that a
portion of the deferred tax liability related to the mark-to-market temporary
difference for residential mortgage loans should be reclassified as an uncertain
tax position. This reclassification from the Company’s previously recorded
deferred tax liability account amounted to $2.2 million and was required as, in
management’s judgment, it was no longer more likely than not that the related
tax deduction would be treated as currently deductible by the IRS upon
resolution of the examination. This reclassification had no impact on the
reported results of operations for the quarter ended March 31,
2008. At December 31, 2007 the Company determined that it had no
uncertain tax positions.
In
connection with the IRS examination, the Company remitted a $1.6 million tax
payment in the first quarter of 2008 to suspend the potential accrual of
additional interest that may result upon ultimate resolution of the fair market
value measurement issue under examination. The Company also recorded
an interest accrual of $168,000 associated with the proposed
adjustments. The Company reports interest and penalties associated
with tax obligations in other non-interest expense.
In June
2008, the Company agreed to a settlement of the proposed adjustments with the
IRS. As a result, for tax years 2005 and 2006 the Company has a tax deficiency
of $994,000 and related interest due of $76,000. Since the Company remitted $1.6
million to the IRS in the first quarter of 2008, the Company recorded a $551,000
income tax receivable at June 30, 2008. During the second quarter of 2008, the
Company reversed $92,000 of the interest accrual amount established in the first
quarter of 2008. In conjunction with the settlement, the Company has amended its
calculation of the fair market value of its residential mortgage portfolio
beginning with the 2007 tax year.
ITEM
2. Management’s Discussion and Analysis of
Financial Condition and Results of Operations
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.
Comparison
of Financial Condition at June 30, 2008 and December 31, 2007
Total
assets increased $134.9 million, or 12.5%, to $1.2 billion at June 30, 2008 from
$1.1 billion at December 31, 2007 reflecting growth in securities available
for sale and loans, funded by increases in both deposits ($56.0 million) and
Federal Home Loan Bank advances ($82.4 million). Securities available for sale
increased $91.4 million, or 45.4%, to $292.7 million at June 30, 2008 from
$201.3 million at December 31, 2007, due to purchases of debt securities
available for sale totaling $167.5 million, partially offset by sales, calls and
maturities of certain debt securities and repayments of mortgage-backed
securities. The significant increase in securities available for sale was due to
the implementation of a strategy to deploy excess capital. During the first half
of 2008, management purchased agency mortgage-backed securities with predictable
cash flows and attractive spreads to U.S. treasury securities. Total loans
increased $33.3 million, or 4.0%, to $858.0 million at June 30, 2008 from
$824.7 million at December 31, 2007 reflecting growth in the residential (5.2%)
and commercial real estate (8.3%) portfolios as a result of business development
efforts and competitive products and pricing. Construction loan balances
declined $4.8 million, or 11.3%, to $37.3 million at June 30, 2008 as a result
of pay-downs and conservative underwriting standards. All other categories of
loans were essentially flat during the period reflecting sluggish loan
origination activity offset by prepayments and scheduled
amortization.
Total deposits increased
$56.0 million, or 7.8%, to $774.7 million at June 30, 2008 compared to $718.7
million at December 31, 2007 mainly due to competitive products and pricing,
superior customer service, targeted promotional activities and the opening of
two new branches in 2008. Core deposit balances grew $34.9 million, or 9.4%, to
$405.9 million at June 30, 2008 from $371.0 million at December 31,
2007.
Total
stockholders’ equity increased $506,000, or 0.2%, to $226.6 million at June 30,
2008 from $226.1 million at December 31, 2007 as a result of net
income of $4.0 million for the six months ended June 30, 2008, stock-based
compensation totaling $761,000 and ESOP compensation expense of $349,000. These
increases were partially offset by payments of cash dividends amounting to $2.1
million, an increase of $1.9 million in net unrealized losses on securities
available for sale and repurchases of our common stock totaling $537,000 to fund
the 2008 Equity Incentive Plan.
Credit
Quality
The
Company actively manages credit quality through its underwriting practices and
collection operations and it does not offer nor has it historically offered,
residential mortgage loans to subprime or Alt-A borrowers. Non-performing assets
totaled $4.8 million, or 0.39% of total assets, at June 30, 2008 compared to
$2.7 million, or 0.25% of total assets, at December 31, 2007. Net loan
charge-offs for the six months ended June 30, 2008 totaled $387,000 compared to
$101,000 in the same period of 2007. Commercial and industrial loan charge-offs
represented $241,000 or 62%, of the total charge-offs, and the majority of such
charge-offs related to one commercial relationship.
Delinquent Loans.
The following table sets forth our loan delinquencies for sixty days and
over by type and by amount at the dates indicated.
|
|
Loans
Delinquent For
|
|
|
|
60
- 89 Days
|
|
|
90
Days and Over
|
|
|
Total
|
|
|
|
Number
|
|
|
Amount
|
|
|
Number
|
|
|
Amount
|
|
|
Number
|
|
|
Amount
|
|
|
|
(Dollars
in thousands)
|
|
At June 30,
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
mortgages
|
|
|
4 |
|
|
$ |
393 |
|
|
|
6 |
|
|
$ |
1,500 |
|
|
|
10 |
|
|
$ |
1,893 |
|
Commercial
mortgage
|
|
|
6 |
|
|
|
1,106 |
|
|
|
11 |
|
|
|
1,404 |
|
|
|
17 |
|
|
|
2,510 |
|
Construction
|
|
|
- |
|
|
|
- |
|
|
|
7 |
|
|
|
800 |
|
|
|
7 |
|
|
|
800 |
|
Home
equity
|
|
|
6 |
|
|
|
377 |
|
|
|
1 |
|
|
|
75 |
|
|
|
7 |
|
|
|
452 |
|
Commercial
and industrial
|
|
|
16 |
|
|
|
290 |
|
|
|
7 |
|
|
|
307 |
|
|
|
23 |
|
|
|
597 |
|
Automobile
|
|
|
7 |
|
|
|
45 |
|
|
|
- |
|
|
|
- |
|
|
|
7 |
|
|
|
45 |
|
Other
consumer
|
|
|
1 |
|
|
|
4 |
|
|
|
1 |
|
|
|
49 |
|
|
|
2 |
|
|
|
53 |
|
Total
|
|
|
40 |
|
|
$ |
2,215 |
|
|
|
33 |
|
|
$ |
4,135 |
|
|
|
73 |
|
|
$ |
6,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31,
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
mortgages
|
|
|
2 |
|
|
$ |
595 |
|
|
|
4 |
|
|
$ |
328 |
|
|
|
6 |
|
|
$ |
923 |
|
Commercial
mortgage
|
|
|
11 |
|
|
|
1,546 |
|
|
|
5 |
|
|
|
555 |
|
|
|
16 |
|
|
|
2,101 |
|
Construction
|
|
|
- |
|
|
|
- |
|
|
|
3 |
|
|
|
578 |
|
|
|
3 |
|
|
|
578 |
|
Home
equity
|
|
|
11 |
|
|
|
489 |
|
|
|
3 |
|
|
|
52 |
|
|
|
14 |
|
|
|
541 |
|
Commercial
and industrial
|
|
|
20 |
|
|
|
948 |
|
|
|
10 |
|
|
|
272 |
|
|
|
30 |
|
|
|
1,220 |
|
Automobile
|
|
|
5 |
|
|
|
46 |
|
|
|
- |
|
|
|
- |
|
|
|
5 |
|
|
|
46 |
|
Other
consumer
|
|
|
4 |
|
|
|
58 |
|
|
|
- |
|
|
|
- |
|
|
|
4 |
|
|
|
58 |
|
Total
|
|
|
53 |
|
|
$ |
3,682 |
|
|
|
25 |
|
|
$ |
1,785 |
|
|
|
78 |
|
|
$ |
5,467 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classified
Assets. The following table shows the aggregate amount of our
classified assets at the date indicated for both loans and foreclosed assets.
The amount of residential real estate loans classified as “substandard” in the
table includes three owner occupied mortgage loans classified due to the
commercial lending relationships, one of which is not making payments in
accordance with contractual loan terms.
|
|
At
June 30,
|
|
|
At
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
Residential Real Estate
(1):
|
|
|
|
|
|
|
Substandard
|
|
$ |
1,846
|
(2) |
|
$ |
1,278 |
|
|
|
|
|
|
|
|
|
|
All
Other Loans:
|
|
|
|
|
|
|
|
|
Special
mention
|
|
|
18,960 |
|
|
|
13,800 |
|
Substandard
|
|
|
20,505 |
|
|
|
19,377 |
|
Doubtful
|
|
|
606 |
|
|
|
244 |
|
Loss
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Foreclosed
Assets:
|
|
|
|
|
|
|
|
|
Other
real estate owned
|
|
|
630 |
|
|
|
880 |
|
|
|
|
|
|
|
|
|
|
Total
classified assets
|
|
$ |
42,547 |
|
|
$ |
35,579 |
|
|
|
|
|
|
|
|
|
|
(1) Includes
one-to-four family loans and home equity loans and lines of
credit.
|
|
|
|
|
|
(2) Includes
nine residential loans, five of which are in foreclosure or liquidation
proceedings.
|
|
|
|
|
|
|
|
|
|
|
Comparison
of Operating Results for the Three Months Ended June 30, 2008 and
2007
Overview
Our
results of operations depend primarily on our net interest income. Net interest
income is the difference between the interest income earned on interest-earning
assets, consisting primarily of loans, investment securities and other
interest-earning assets, and the interest paid on interest-bearing liabilities,
consisting primarily of deposits and Federal Home Loan Bank
advances.
Our
results of operations also are affected by provisions for loan losses,
non-interest income and non-interest expense. Non-interest income consists
primarily of deposit account fees, wealth management fees, increases in the cash
surrender value of bank-owned life insurance and miscellaneous other income.
Non-interest expense consists primarily of compensation and employee benefits,
data processing, occupancy, marketing and public relations, professional
services, postage, printing, 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 was $2.0 million, or $0.12
per diluted share, for the second quarter of 2008 compared to net income of
$978,000, or $0.06 per diluted share, for the same period in 2007. The Company’s
improved results were largely due to a significant increase in net interest
income, driven by an increase in net interest margin of 56 basis points 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 affected by an increase in
fee income from deposit accounts, partially offset by higher provision for loan
losses and an increase in non-interest expenses.
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,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
|
Average
|
|
|
and
|
|
|
Yield/
|
|
|
Average
|
|
|
and
|
|
|
Yield/
|
|
|
|
Balance
|
|
|
Dividends
|
|
|
Cost
|
|
|
Balance
|
|
|
Dividends
|
|
|
Cost
|
|
|
|
|
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
real estate
|
|
$ |
356,721 |
|
|
$ |
4,926 |
|
|
|
5.52 |
% |
|
$ |
340,716 |
|
|
$ |
4,809 |
|
|
|
5.65 |
% |
Commercial
real estate
|
|
|
257,831 |
|
|
|
4,010 |
|
|
|
6.22 |
% |
|
|
236,840 |
|
|
|
3,898 |
|
|
|
6.58 |
% |
Home
equity
|
|
|
117,106 |
|
|
|
1,643 |
|
|
|
5.61 |
% |
|
|
118,140 |
|
|
|
1,938 |
|
|
|
6.56 |
% |
Commercial
and industrial
|
|
|
83,228 |
|
|
|
1,302 |
|
|
|
6.26 |
% |
|
|
71,990 |
|
|
|
1,323 |
|
|
|
7.35 |
% |
Consumer
and other
|
|
|
30,418 |
|
|
|
414 |
|
|
|
5.44 |
% |
|
|
30,065 |
|
|
|
382 |
|
|
|
5.08 |
% |
Total
loans
|
|
|
845,304 |
|
|
|
12,295 |
|
|
|
5.82 |
% |
|
|
797,751 |
|
|
|
12,350 |
|
|
|
6.19 |
% |
Investment
securities
|
|
|
288,502 |
|
|
|
3,560 |
|
|
|
4.94 |
% |
|
|
166,163 |
|
|
|
1,850 |
|
|
|
4.45 |
% |
Other
interest-earning assets
|
|
|
12,591 |
|
|
|
118 |
|
|
|
3.75 |
% |
|
|
21,605 |
|
|
|
313 |
|
|
|
5.79 |
% |
Total
interest-earning assets
|
|
|
1,146,397 |
|
|
|
15,973 |
|
|
|
5.57 |
% |
|
|
985,519 |
|
|
|
14,513 |
|
|
|
5.89 |
% |
Noninterest-earning
assets
|
|
|
37,230 |
|
|
|
|
|
|
|
|
|
|
|
32,990 |
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
1,183,627 |
|
|
|
|
|
|
|
|
|
|
$ |
1,018,509 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
accounts
|
|
$ |
82,335 |
|
|
|
235 |
|
|
|
1.14 |
% |
|
$ |
65,304 |
|
|
|
149 |
|
|
|
0.91 |
% |
Money
market accounts
|
|
|
173,958 |
|
|
|
784 |
|
|
|
1.80 |
% |
|
|
180,940 |
|
|
|
1,442 |
|
|
|
3.19 |
% |
NOW
accounts
|
|
|
33,332 |
|
|
|
45 |
|
|
|
0.54 |
% |
|
|
34,959 |
|
|
|
47 |
|
|
|
0.54 |
% |
Certificates
of deposit
|
|
|
364,017 |
|
|
|
3,295 |
|
|
|
3.62 |
% |
|
|
335,626 |
|
|
|
3,839 |
|
|
|
4.58 |
% |
Total
interest-bearing deposits
|
|
|
653,642 |
|
|
|
4,359 |
|
|
|
2.67 |
% |
|
|
616,829 |
|
|
|
5,477 |
|
|
|
3.55 |
% |
FHLB
advances
|
|
|
170,052 |
|
|
|
1,603 |
|
|
|
3.77 |
% |
|
|
149,853 |
|
|
|
1,779 |
|
|
|
4.75 |
% |
Other
interest-bearing liabilities
|
|
|
12,579 |
|
|
|
103 |
|
|
|
3.28 |
% |
|
|
10,997 |
|
|
|
122 |
|
|
|
4.44 |
% |
Total
interest-bearing liabilities
|
|
|
836,273 |
|
|
|
6,065 |
|
|
|
2.90 |
% |
|
|
777,679 |
|
|
|
7,378 |
|
|
|
3.79 |
% |
Demand
deposits
|
|
|
108,348 |
|
|
|
|
|
|
|
|
|
|
|
98,343 |
|
|
|
|
|
|
|
|
|
Other
noninterest-bearing liabilities
|
|
|
10,765 |
|
|
|
|
|
|
|
|
|
|
|
3,591 |
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
955,386 |
|
|
|
|
|
|
|
|
|
|
|
879,613 |
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
228,241 |
|
|
|
|
|
|
|
|
|
|
|
138,896 |
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' equity
|
|
$ |
1,183,627 |
|
|
|
|
|
|
|
|
|
|
$ |
1,018,509 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
|
|
|
|
$ |
9,908 |
|
|
|
|
|
|
|
|
|
|
$ |
7,135 |
|
|
|
|
|
Interest
rate spread(1)
|
|
|
|
|
|
|
|
|
|
|
2.67 |
% |
|
|
|
|
|
|
|
|
|
|
2.10 |
% |
Net
interest-earning assets(2)
|
|
$ |
310,124 |
|
|
|
|
|
|
|
|
|
|
$ |
207,840 |
|
|
|
|
|
|
|
|
|
Net
interest margin(3)
|
|
|
|
|
|
|
|
|
|
|
3.46 |
% |
|
|
|
|
|
|
|
|
|
|
2.90 |
% |
Average
interest-earning assets to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
average
interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
137.08 |
% |
|
|
|
|
|
|
|
|
|
|
126.73 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 annualized 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,
|
|
|
|
2008
vs. 2007
|
|
|
|
Increase
(Decrease) Due to
|
|
|
|
Volume
|
|
|
Rate
|
|
|
Net
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning
assets:
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
Residential
real estate
|
|
$ |
223 |
|
|
$ |
(106 |
) |
|
$ |
117 |
|
Commercial
real estate
|
|
|
333 |
|
|
|
(221 |
) |
|
|
112 |
|
Home
equity
|
|
|
(17 |
) |
|
|
(278 |
) |
|
|
(295 |
) |
Commercial
and industrial
|
|
|
191 |
|
|
|
(212 |
) |
|
|
(21 |
) |
Consumer
and other
|
|
|
4 |
|
|
|
28 |
|
|
|
32 |
|
Total
loans
|
|
|
734 |
|
|
|
(789 |
) |
|
|
(55 |
) |
Investment
securities
|
|
|
1,491 |
|
|
|
219 |
|
|
|
1,710 |
|
Other
interest-earning assets
|
|
|
(106 |
) |
|
|
(89 |
) |
|
|
(195 |
) |
Total
interest-earning assets
|
|
|
2,119 |
|
|
|
(659 |
) |
|
|
1,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
accounts
|
|
|
44 |
|
|
|
42 |
|
|
|
86 |
|
Money
market accounts
|
|
|
(54 |
) |
|
|
(604 |
) |
|
|
(658 |
) |
NOW
accounts
|
|
|
(2 |
) |
|
|
- |
|
|
|
(2 |
) |
Certificates
of deposit
|
|
|
305 |
|
|
|
(849 |
) |
|
|
(544 |
) |
Total
interest-bearing deposits
|
|
|
293 |
|
|
|
(1,411 |
) |
|
|
(1,118 |
) |
FHLB
advances
|
|
|
221 |
|
|
|
(397 |
) |
|
|
(176 |
) |
Other
interest-bearing liabilities
|
|
|
16 |
|
|
|
(35 |
) |
|
|
(19 |
) |
Total
interest-bearing liabilities
|
|
|
530 |
|
|
|
(1,843 |
) |
|
|
(1,313 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in net interest income
|
|
$ |
1,589 |
|
|
$ |
1,184 |
|
|
$ |
2,773 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest
Income Before Provision for Loan Losses. Net interest income
before provision for loan losses increased $2.8 million, or 38.9%, to
$9.9 million for the three months ended June 30, 2008 from the same period
in 2007 as a result of net interest margin expansion and growth in average
earning assets. Net interest margin increased 56 basis points to 3.46% for the
three-month period ended June 30, 2008 compared to 2.90% for the same period in
2007 due to the use of net proceeds from the Company’s second-step 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 3.25% reduction in the
federal funds rate from 5.25% at September 1, 2007 to 2.00% at June 30,
2008.
Interest
Income. Interest income increased $1.5 million, or 10.1%, to
$16.0 million for the three months ended June 30, 2008 from $14.5 million for
the prior year period, reflecting an increase in total average interest-earning
asset balances, partially offset by a lower yield on average interest-earning
assets. Total average interest-earning asset balances increased $160.9 million,
or 16.3%, to $1.1 billion for the three months ended June 30, 2008 mainly due to
loan growth and purchases of mortgage-backed securities. Total average loans
increased $47.6 million, or 6.0%, to $845.3 million for the second quarter of
2008 as a result of origination activity in the residential real estate,
commercial real estate and commercial and industrial portfolios, partially
offset by scheduled amortization and prepayments of existing loans. Total
average investment securities increased by $122.3 million, or 73.6%, to $288.5
million due to the purchases of bonds, partially offset by maturities, calls,
sales and principal repayments of existing securities. The yield on average
interest-earning assets decreased by 32 basis points to 5.57% for the second
quarter of 2008 in connection with the lower interest rate environment. The
decrease in market rates contributed to the downward repricing of a portion of
the Company’s existing assets and to lower 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 decrease in market rates was
limited. The impact of the decrease in market rates was partially offset by the
purchases of higher yielding mortgage backed securities.
Interest
Expense. Interest expense decreased $1.3 million, or 17.8%, to
$6.1 million for the three months ended June 30, 2008 from
$7.4 million for the prior year period reflecting a decrease in the average
rate paid on interest-bearing liabilities, partially offset by an increase in
average interest-bearing liabilities. The average rate paid on interest-bearing
liabilities declined 89 basis points to 2.90% for the three months ended June
30, 2008 reflecting the impact of lower market rates related to the interest
rate decreases initiated by the Federal Reserve Board beginning in December
2007. Since a large portion of the Company’s interest-bearing liabilities are
short-term, the impact of the decrease in market rates was significant. Average
interest-bearing liabilities increased $58.6 million, or 7.5%, to
$836.3 million for the three months ended June 30, 2008 from
$777.7 million for the prior year period reflecting growth in
interest-bearing deposits and FHLB advances. Total average interest-bearing
deposits increased $36.8 million, or 6.0%, to $653.6 million for the second
quarter of 2008 as compared to $616.8 million for the three months ended June
30, 2007, mainly attributable to an increase in savings account and certificate
of deposit balances. Total average FHLB advances increased $20.2 million, or
13.5%, to $170.1 million to fund asset growth and to take advantage of the lower
interest rates.
Provision for
Loan Losses. The provision for loan losses increased $331,000 to $651,000
for the three months ended June 30, 2008 as compared to $320,000 for the same
period in 2007 resulting primarily from a $9.6 million increase in classified
assets in the second quarter of 2008 compared to a $2.7 million increase in the
2007 period as well as an increase in net charge-offs of $109,000. 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 $8.2 million, or 0.95%, of loans outstanding at June 30,
2008.
Non-interest
Income. Non-interest income increased $139,000, or 9.7%, to
$1.6 million for the three months ended June 30, 2008 due in large part to
growth of $59,000, or 5.4%, in deposit account fees and a $43,000 loss on the
sale of securities in the second quarter of 2007.
Non-interest
Expense. Non-interest expense increased $975,000, or 14.8%, to
$7.6 million for the three months ended June 30, 2008 from
$6.6 million for the prior year period. Total salaries and benefits
increased $464,000, or 12.4%, mainly due to staffing costs for two new branches
opened in 2008, 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 increases. Occupancy costs expanded $97,000, or
20.2%, mainly due to the two branches opened in 2008. Data processing expenses
increased $162,000, or 24.8%, as a result of growth in the total number of loan
and deposit accounts serviced, new branches opened in 2008 and costs for the
branch imaging process introduced in all branches beginning in 2008.
Professional services increased $109,000, or 41.4%, related to the annual
stockholders meeting at which the 2008 incentive plan was approved. Other
expenses rose $151,000, or 15.2%, in connection with a higher quarterly Federal
Deposit Insurance Corporation insurance assessment as a result of the expiration
of the credit used to reduce the premium each quarter.
Income Tax
Expense. Income tax expense
increased $575,000 to $1.3 million for three months ended June 30, 2008 from
$697,000 for the comparable 2007 period as a result of an increase in taxable
income, offset to some extent by a lower effective tax rate. The effective tax
rate decreased from 41.6% in the second quarter of 2007 to 38.8% for the same
period in 2008 primarily due to the increased portion of income earned in the
securities corporation at the lower state tax rate and a decrease in the
relative impact (due to the projected increase in pre-tax income in 2008) of
stock-based compensation.
Comparison
of Operating Results for the Six Months Ended June 30, 2008 and
2007
Net
Income. The Company’s net income for the six months ended June
30, 2008 amounted to $4.0 million, or $0.24 per diluted share, compared to $1.8
million, or $0.11 per diluted share, for the same period in 2007. The Company’s
higher net income and earnings per share were due in large part to net interest
margin expansion and growth in average earning assets, partially offset by
increases in provision for loan losses and non-interest expenses.
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,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
|
Average
|
|
|
and
|
|
|
Yield/
|
|
|
Average
|
|
|
and
|
|
|
Yield/
|
|
|
|
Balance
|
|
|
Dividends
|
|
|
Cost
|
|
|
Balance
|
|
|
Dividends
|
|
|
Cost
|
|
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
real estate
|
|
$ |
352,739 |
|
|
$ |
9,849 |
|
|
|
5.58 |
% |
|
$ |
338,814 |
|
|
$ |
9,555 |
|
|
|
5.64 |
% |
Commercial
real estate
|
|
|
253,397 |
|
|
|
8,032 |
|
|
|
6.34 |
% |
|
|
231,046 |
|
|
|
7,601 |
|
|
|
6.58 |
% |
Home
equity loans
|
|
|
117,181 |
|
|
|
3,437 |
|
|
|
5.87 |
% |
|
|
116,934 |
|
|
|
3,812 |
|
|
|
6.52 |
% |
Commercial
and industrial
|
|
|
82,803 |
|
|
|
2,690 |
|
|
|
6.50 |
% |
|
|
70,363 |
|
|
|
2,581 |
|
|
|
7.34 |
% |
Consumer
and other
|
|
|
30,684 |
|
|
|
834 |
|
|
|
5.44 |
% |
|
|
29,929 |
|
|
|
756 |
|
|
|
5.05 |
% |
Total
loans
|
|
|
836,804 |
|
|
|
24,842 |
|
|
|
5.94 |
% |
|
|
787,086 |
|
|
|
24,305 |
|
|
|
6.18 |
% |
Investment
securities
|
|
|
250,191 |
|
|
|
6,178 |
|
|
|
4.94 |
% |
|
|
173,287 |
|
|
|
3,832 |
|
|
|
4.42 |
% |
Other
interest-earning assets
|
|
|
17,193 |
|
|
|
359 |
|
|
|
4.18 |
% |
|
|
24,944 |
|
|
|
688 |
|
|
|
5.52 |
% |
Total
interest-earning assets
|
|
|
1,104,188 |
|
|
|
31,379 |
|
|
|
5.68 |
% |
|
|
985,317 |
|
|
|
28,825 |
|
|
|
5.85 |
% |
Noninterest-earning
assets
|
|
|
35,558 |
|
|
|
|
|
|
|
|
|
|
|
32,128 |
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
1,139,746 |
|
|
|
|
|
|
|
|
|
|
$ |
1,017,445 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
accounts
|
|
$ |
74,943 |
|
|
|
400 |
|
|
|
1.07 |
% |
|
$ |
65,114 |
|
|
|
289 |
|
|
|
0.89 |
% |
Money
market accounts
|
|
|
174,380 |
|
|
|
1,793 |
|
|
|
2.06 |
% |
|
|
177,586 |
|
|
|
2,799 |
|
|
|
3.15 |
% |
NOW
accounts
|
|
|
32,629 |
|
|
|
85 |
|
|
|
0.52 |
% |
|
|
34,547 |
|
|
|
91 |
|
|
|
0.53 |
% |
Certificates
of deposit
|
|
|
359,024 |
|
|
|
7,054 |
|
|
|
3.93 |
% |
|
|
329,837 |
|
|
|
7,479 |
|
|
|
4.53 |
% |
Total
interest-bearing deposits
|
|
|
640,976 |
|
|
|
9,332 |
|
|
|
2.91 |
% |
|
|
607,084 |
|
|
|
10,658 |
|
|
|
3.51 |
% |
FHLB
advances
|
|
|
143,285 |
|
|
|
2,904 |
|
|
|
4.05 |
% |
|
|
160,232 |
|
|
|
3,802 |
|
|
|
4.75 |
% |
Other
interest-bearing liabilities
|
|
|
12,085 |
|
|
|
204 |
|
|
|
3.38 |
% |
|
|
11,812 |
|
|
|
274 |
|
|
|
4.64 |
% |
Total
interest-bearing liabilities
|
|
|
796,346 |
|
|
|
12,440 |
|
|
|
3.12 |
% |
|
|
779,128 |
|
|
|
14,734 |
|
|
|
3.78 |
% |
Demand
deposits
|
|
|
105,066 |
|
|
|
|
|
|
|
|
|
|
|
96,333 |
|
|
|
|
|
|
|
|
|
Other
noninterest-bearing liabilities
|
|
|
10,507 |
|
|
|
|
|
|
|
|
|
|
|
3,386 |
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
911,919 |
|
|
|
|
|
|
|
|
|
|
|
878,847 |
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
227,827 |
|
|
|
|
|
|
|
|
|
|
|
138,598 |
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' equity
|
|
$ |
1,139,746 |
|
|
|
|
|
|
|
|
|
|
$ |
1,017,445 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
|
|
|
|
$ |
18,939 |
|
|
|
|
|
|
|
|
|
|
$ |
14,091 |
|
|
|
|
|
Interest
rate spread(1)
|
|
|
|
|
|
|
|
|
|
|
2.56 |
% |
|
|
|
|
|
|
|
|
|
|
2.07 |
% |
Net
interest-earning assets(2)
|
|
$ |
307,842 |
|
|
|
|
|
|
|
|
|
|
$ |
206,189 |
|
|
|
|
|
|
|
|
|
Net
interest margin(3)
|
|
|
|
|
|
|
|
|
|
|
3.43 |
% |
|
|
|
|
|
|
|
|
|
|
2.86 |
% |
Average
interest-bearing assets to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
average
interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
138.66 |
% |
|
|
|
|
|
|
|
|
|
|
126.46 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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,
|
|
|
|
2008
vs. 2007
|
|
|
|
Increase
(Decrease) Due to
|
|
|
|
Volume
|
|
|
Rate
|
|
|
Net
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning
assets:
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
Residential
real estate
|
|
$ |
390 |
|
|
$ |
(96 |
) |
|
$ |
294 |
|
Commercial
real estate
|
|
|
715 |
|
|
|
(284 |
) |
|
|
431 |
|
Home
equity loans
|
|
|
8 |
|
|
|
(383 |
) |
|
|
(375 |
) |
Commercial
and industrial
|
|
|
424 |
|
|
|
(315 |
) |
|
|
109 |
|
Consumer
and other
|
|
|
19 |
|
|
|
59 |
|
|
|
78 |
|
Total
loans
|
|
|
1,556 |
|
|
|
(1,019 |
) |
|
|
537 |
|
Investment
securities
|
|
|
1,858 |
|
|
|
488 |
|
|
|
2,346 |
|
Other
interest-earning assets
|
|
|
(185 |
) |
|
|
(144 |
) |
|
|
(329 |
) |
Total
interest-earning assets
|
|
|
3,229 |
|
|
|
(675 |
) |
|
|
2,554 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
accounts
|
|
|
48 |
|
|
|
63 |
|
|
|
111 |
|
Money
market accounts
|
|
|
(50 |
) |
|
|
(956 |
) |
|
|
(1,006 |
) |
NOW
accounts
|
|
|
(5 |
) |
|
|
(1 |
) |
|
|
(6 |
) |
Certificates
of deposit
|
|
|
627 |
|
|
|
(1,052 |
) |
|
|
(425 |
) |
Total
interest-bearing deposits
|
|
|
620 |
|
|
|
(1,946 |
) |
|
|
(1,326 |
) |
FHLB
advances
|
|
|
(377 |
) |
|
|
(521 |
) |
|
|
(898 |
) |
Other
interest-bearing liabilities
|
|
|
6 |
|
|
|
(76 |
) |
|
|
(70 |
) |
Total
interest-bearing liabilities
|
|
|
249 |
|
|
|
(2,543 |
) |
|
|
(2,294 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in net interest income
|
|
$ |
2,980 |
|
|
$ |
1,868 |
|
|
$ |
4,848 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest
Income Before Provision for Loan Losses. Net interest income
before provision for loan losses increased $4.8 million, or 34.4%, to $18.9
million for the six months ended June 30, 2008 from $14.1 million for the
comparable 2007 period reflecting growth in average earning assets and net
interest margin expansion. Net interest margin increased 57 basis points to
3.43% for the six months ended June 30, 2008 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 3.25% reduction in the federal funds rate from 5.25% at September
1, 2007 to 2.00% at June 30, 2008.
Interest
Income. Interest income increased $2.6 million, or 8.9%, to
$31.4 million for the six months ended June 30, 2008 from $28.8 million for the
prior year period reflecting expansion in total average interest-earning asset
balances, partially offset by a slight decrease in the yield on average
interest-earning assets. Total average interest-earning asset balances increased
$118.9 million, or 12.1%, to $1.1 billion for the six months ended June 30,
2008 due in large part to purchases of investment securities and strong loan
growth, funded largely by deposit growth and the proceeds of the December 2007
second-step stock offering. Total average loans increased $49.7 million, or
6.3%, to $836.8 million for the first six months of 2008 as a result of
origination activity, partially offset by prepayments and normal amortization.
Total average investment securities increased by $76.9 million, or 44.4%, to
$250.2 million for the first six months of 2008 primarily due to the
implementation of a strategy to deploy excess capital and liquidity resulting
from the Company’s 2007 second-step stock offering. The yield on average
interest-earning assets decreased 17 basis points to 5.68% for the six months
ended June 30, 2008 in connection with the lower interest rate environment.
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 deflation in market rates
was limited. The impact of the decrease in market rates was partially offset by
the purchases of higher yielding mortgage backed securities.
Interest
Expense. Interest expense decreased $2.3 million, or 15.6%, to
$12.4 million for the six months ended June 30, 2008 from
$14.7 million for the prior year period due to a decrease in the average
rate paid on interest-bearing liabilities, partially offset by growth in average
interest-bearing liabilities. The average rate paid on interest-bearing
liabilities declined 66 basis points to 3.12% for the six months ended June 30,
2008 reflecting interest rate cuts 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. Average
interest-bearing liabilities increased $17.2 million, or 2.2%, to
$796.3 million for the six months ended June 30, 2008 reflecting growth in
interest-bearing deposits, somewhat offset by lower FHLB advances. Total average
interest-bearing deposits increased $36.9 million, or 6.1%, to $641.0 million
for the first six months of 2008 mainly attributable to an increase in savings
accounts and certificate of deposit balances. Total average FHLB advances
decreased $16.9 million, or 10.6%, to $143.3 million reflecting the use of
proceeds from the second step offering to pay-down certain outstanding
borrowings.
Provision for
Loan Losses. The provision
for loan losses was $835,000 for the six months ended June 30, 2008 as compared
to $604,000 for the same period in 2007 reflecting an increase in reserves for
classified loans and higher net charge-offs. The allowance
for loan losses was $8.2 million, or 0.95%, of loans outstanding at June
30, 2008.
Non-interest
Income. Non-interest income increased $260,000, or 9.2%, to
$3.1 million for the six months ended June 30, 2008 reflecting growth in
fee income on deposit and loan accounts, 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 and an increase in bank-owned life insurance
income.
Non-interest
Expense. Non-interest expense increased $1.5 million, or
11.4%, to $14.7 million for the six months ended June 30, 2008 from
$13.2 million for the prior year period. Total salaries and benefits
increased $667,000, or 8.8%, mainly due to staffing costs for the two new
branches opened in 2008, 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 increases, partially offset by lower stock
related compensation expense. Occupancy costs grew $115,000, or 11.8%,
principally attributable to the two new branches opened in 2008. Data processing
costs expanded $239,000, or 18.5%, reflecting a larger loan and deposit base,
new branches opened in 2008 and costs for the new branch imaging process.
Professional services increased $163,000, or 25.0%, as a result of costs
incurred in connection with the Company’s annual stockholders meeting at which
the 2008 incentive plan was approved. Other expenses expanded $292,000, or 14.9%
as a result of an increase of $144,000 in Federal Deposit Insurance Corporation
insurance assessments and a $100,000 interest accrual related to the IRS exam
and related adjustments.
Income Tax
Expense. Income tax expense
increased $1.2 million to $2.5 million for six months ended June 30, 2008 from
$1.3 million for the comparable 2007 period. This increase was due to higher
income before income taxes partially offset by a deduction in the effective tax
rate from 41.5% in 2007 to 38.6% in 2008. This deduction was due to the
increased portion of income earned in the securities corporation at the lower
state tax rate and a decrease in the relative impact (due to the projected
increase in pre-tax income in 2008) of stock-based compensation.
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 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” certain longer-term one- to
four-family residential mortgage loans; (ii) continued emphasis on
increasing core deposits; (iii) offering adjustable rate and shorter-term
home equity loans, commercial real estate loans, construction loans and
commercial and industrial loans; (iv) offering a variety of consumer loans,
which typically have shorter-terms and (v ) investing in mortgage-backed
securities with variable rates or fixed rates with shorter durations. Reducing
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.
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,
resulting from an instantaneous and sustained parallel shift in the yield curve
(+200 and -200 basis points) at June 30, 2008 and December 31,
2007.
Net
Interest Income At-Risk
|
|
|
|
|
|
|
|
Estimated
Increase (Decrease)
|
|
Estimated
Increase (Decrease)
|
Change
in Interest Rates
|
|
in
NII
|
|
in
NII
|
(Basis
Points)
|
|
(June
30, 2008)
|
|
(December
31, 2007)
|
|
|
|
|
|
-100
|
|
1.6%
|
|
1.7%
|
Stable
|
|
0.0%
|
|
0.0%
|
+200
|
|
(3.1)%
|
|
(4.2)%
|
|
|
|
|
|
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 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.
Net Portfolio
Value Simulation Analysis. The Office of
Thrift Supervision requires the computation of amounts by which the net present
value of an institution’s cash flow from assets, liabilities and off balance
sheet items (the institution’s net portfolio value or “NPV”) would change in the
event of a range of assumed changes in market interest rates. The Office of
Thrift Supervision provides all institutions that file a Consolidated
Maturity/Rate Schedule as a part of their quarterly Thrift Financial Report an
interest rate sensitivity report of net portfolio value. The Office of Thrift
Supervision simulation model uses a discounted cash flow analysis and an
option-based pricing approach to measuring the interest rate sensitivity of net
portfolio value. Historically, the Office of Thrift Supervision model estimated
the economic value of each type of asset, liability and off-balance sheet
contract under the assumption that the United States Treasury yield curve
increases or decreases instantaneously by 100 to 300 basis points in 100 basis
point increments. However, given the current low level of market interest rates,
we did not prepare a net portfolio value calculation for an interest rate
decrease of greater than 100 basis points. A basis point equals one-hundredth of
one percent, and 200 basis points equals two percent. An increase in interest
rates from 3% to 5% would mean, for example, a 200 basis point increase in the
“Change in Interest Rates” column below. The Office of Thrift Supervision
provides us the results of the interest rate sensitivity model, which is based
on information we provide to the Office of Thrift Supervision to estimate the
sensitivity of our net portfolio value.
The tables below set forth, at the
dates indicated, the estimated changes in our net portfolio value that would
result from the designated instantaneous changes in the United States Treasury
yield curve. Computations of prospective effects of hypothetical interest rate
changes are based on numerous assumptions, including relative levels of market
interest rates, loan prepayments and deposit decay, and should not be relied
upon as indicative of actual results. This data is for United Bank and its
subsidiary only and does not include any yield curve changes in the assets of
United Financial Bancorp, Inc.
|
|
|
June
30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NPV
as a Percentage of Present
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
of Assets (3)
|
|
Change
in
|
|
|
|
|
Estimated
Increase (Decrease) in NPV
|
|
|
|
|
|
Increase
|
|
Interest
Rates
|
|
Estimated
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease)
|
|
(basis
points) (1)
|
|
NPV (2)
|
|
|
Amount
|
|
|
Percent
|
|
|
NPV
Ratio (4)
|
|
|
(basis
points)
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
+300 |
|
|
$ |
95,461 |
|
|
$ |
(74,021 |
) |
|
|
(44 |
)% |
|
|
8.81 |
% |
|
|
(534 |
) |
|
+200 |
|
|
|
119,966 |
|
|
|
(49,516 |
) |
|
|
(29 |
) |
|
|
10.72 |
|
|
|
(343 |
) |
|
+100 |
|
|
|
145,251 |
|
|
|
(24,231 |
) |
|
|
(14 |
) |
|
|
12.54 |
|
|
|
(160 |
) |
|
0 |
|
|
|
169,482 |
|
|
|
|
|
|
|
|
|
|
|
14.15 |
|
|
|
|
|
|
-100 |
|
|
|
186,745 |
|
|
|
17,263 |
|
|
|
10 |
|
|
|
15.15 |
|
|
|
101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Assumes
an instantaneous uniform change in interest rates at all
maturities.
|
|
|
|
|
(2)
|
NPV
is the discounted present value of expected cash flows from assets,
liabilities and off-balance sheet contracts.
|
(3)
|
Present
value of assets represents the discounted present value of incoming cash
flows on interest-earning assets.
|
(4)
|
NPV
ratio represents NPV divided by the present value of
assets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NPV
as a Percentage of Present
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
of Assets (3)
|
|
Change
in
|
|
|
|
|
Estimated
Increase (Decrease) in NPV
|
|
|
|
|
|
Increase
|
|
Interest
Rates
|
|
Estimated
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease)
|
|
(basis
points) (1)
|
|
NPV (2)
|
|
|
Amount
|
|
|
Percent
|
|
|
NPV
Ratio (4)
|
|
|
(basis
points)
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
+300 |
|
|
$ |
108,167 |
|
|
$ |
(64,752 |
) |
|
|
(37 |
)% |
|
|
11.24 |
% |
|
|
(504 |
) |
|
+200 |
|
|
|
130,569 |
|
|
|
(42,351 |
) |
|
|
(24 |
) |
|
|
13.13 |
|
|
|
(316 |
) |
|
+100 |
|
|
|
153,090 |
|
|
|
(19,829 |
) |
|
|
(11 |
) |
|
|
14.88 |
|
|
|
(140 |
) |
|
0 |
|
|
|
172,919 |
|
|
|
|
|
|
|
|
|
|
|
16.29 |
|
|
|
|
|
|
-100 |
|
|
|
186,881 |
|
|
|
13,962 |
|
|
|
8 |
|
|
|
17.14 |
|
|
|
86 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Assumes
an instantaneous uniform change in interest rates at all
maturities.
|
|
|
|
|
(2)
|
NPV
is the discounted present value of expected cash flows from assets,
liabilities and off-balance sheet contracts.
|
(3)
|
Present
value of assets represents the discounted present value of incoming cash
flows on interest-earning assets.
|
(4)
|
NPV
ratio represents NPV divided by the present value of
assets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
tables above indicate that at June 30, 2008 and December 31, 2007, in the event
of a 100 basis point decrease in interest rates, we would experience a 10% and
8%, respectively, increase in net portfolio value. In the event of a 300 basis
point increase in interest rates, we would experience a 44% and 37%,
respectively, decrease in net portfolio value.
Certain
shortcomings are inherent in the methodology used in the above interest rate
risk measurement. Modeling changes in net portfolio value require making certain
assumptions that may or may not reflect the manner in which actual yields and
costs respond to changes in market interest rates. In this regard, the net
portfolio value table presented assumes that the composition of our
interest-sensitive assets and liabilities existing at the beginning of a period
remains constant over the period being measured and assumes that a particular
change in interest rates is reflected uniformly across the yield curve
regardless of the duration or repricing of specific assets and liabilities.
Accordingly, although the net portfolio value table provides an indication of
our interest rate risk exposure at a particular point in time, such measurements
are not intended to and do not provide a precise forecast of the effect of
changes in market interest rates on our net interest income and will differ from
actual results.
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, advances from the Federal Home Loan
Bank of Boston, loan and mortgage-backed securities repayments and maturities
and sales of loans and other investment securities. While maturities and
scheduled amortization of loans and securities are predictable sources of funds,
deposit flows and mortgage prepayments are greatly influenced by market 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. At June 30, 2008 our
liquidity ratio was 34.27%, compared to 26.13% at December 31,
2007.
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,
2008, cash and cash equivalents totaled $17.1 million. Securities classified as
available-for-sale, which provide additional sources of liquidity, totaled
$274.0 million, excluding those pledged as collateral for various purposes, at
June 30, 2008. In addition, at June 30, 2008, we had the ability to borrow a
total of approximately $496.1 million from the Federal Home Loan Bank of Boston.
On that date, we had $190.4 million in advances outstanding.
Our cash
flows are derived from operating activities, investing activities and financing
activities as reported in our Consolidated Statements of Cash Flows included in
our Consolidated Financial Statements.
At June
30, 2008, we had $10.7 million in loan commitments outstanding. In addition to
commitments to originate loans, we had $150.4 million in unused lines of credit
to borrowers and $24.1 million to be disbursed under existing construction loan
commitments. Certificates of deposit due within one year of June 30, 2008
totaled $294.0 million, or 38.0% 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, 2009. 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.
Our
primary investing activities are the origination of loans and the purchase of
securities. For the six months ended June 30, 2008, we originated $165.2 million
of loans and purchased $170.0 million of securities. In the comparable 2007
period, we originated $156.5 million of loans and purchased $21.9 million of
securities.
Financing
activities consist primarily of activity in deposit accounts and Federal Home
Loan Bank advances. We experienced a net increase in total deposits of $56.0
million and $40.1 million for the six months ended June 30, 2008 and 2007,
respectively. Deposit flows are affected by the overall level of interest rates,
the interest rates and products offered by us and our local competitors and
other factors.
Liquidity
management is both a daily and long-term function of business management. If we
require funds beyond our ability to generate them internally, borrowing
agreements exist with the Federal Home Loan Bank, which provides an additional
source of funds. Federal Home Loan Bank advances increased by $82.4 million
during the six months ended June 30, 2008 and decreased $27.3 million during the
comparable 2007 period. Federal Home Loan Bank advances have primarily been used
to fund loan demand and to purchase securities. We have also used Federal Home
Loan Bank advances to “match-fund” certain longer-term one- to four-family
residential mortgage loans and commercial real estate loans. The Bank’s unused
borrowing capacity with the FHLBB, excluding its $12.4 million line of credit,
was approximately $293.3 at June 30, 2008 and $293.2 at December 31, 2007. At
June 30, 2008 and December 31, 2007, the Bank had no borrowing against the line
of credit.
Off-Balance
Sheet Arrangements and Aggregate Contractual Obligations
Commitments
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. We consider commitments to extend credit in
determining our allowance for loan losses.
Contractual
Obligations
In the
ordinary course of our operations, we enter into certain contractual
obligations. Such obligations include operating leases for premises and
equipment. The following table summarizes our significant fixed and determinable
contractual obligations and other funding needs by payment date at June 30,
2008. The payment amounts represent those amounts due to the recipient and do
not include any unamortized premiums or discounts or other similar carrying
amount adjustments.
|
|
Payments
Due by Period (in thousands)
|
|
|
|
Less
Than
|
|
|
One
to Three
|
|
|
Three
to Five
|
|
|
More
than
|
|
|
|
|
|
|
One
Year
|
|
|
Years
|
|
|
Years
|
|
|
Five
Years
|
|
|
Total
|
|
Contractual
Obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates
of deposit
|
|
$ |
294,006 |
|
|
$ |
69,330 |
|
|
$ |
5,428 |
|
|
$ |
- |
|
|
$ |
368,764 |
|
Federal
Home Loan Bank advances
|
|
|
58,687 |
|
|
|
55,339 |
|
|
|
46,362 |
|
|
|
30,001 |
|
|
|
190,389 |
|
Repurchase
agreements
|
|
|
8,963 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
8,963 |
|
Standby
letters of credit
|
|
|
863 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
863 |
|
Operating
leases
|
|
|
544 |
|
|
|
1,002 |
|
|
|
726 |
|
|
|
2,935 |
|
|
|
5,207 |
|
Capitalized
leases
|
|
|
252 |
|
|
|
504 |
|
|
|
503 |
|
|
|
4,137 |
|
|
|
5,396 |
|
Future
benefits to be paid under
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
retirement
plans
|
|
|
196 |
|
|
|
- |
|
|
|
3,257 |
|
|
|
610 |
|
|
|
4,063 |
|
Total
|
|
$ |
363,511 |
|
|
$ |
126,175 |
|
|
$ |
56,276 |
|
|
$ |
37,683 |
|
|
$ |
583,645 |
|
Commitments
to extend credit
|
|
$ |
186,026 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
186,026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2008, the Bank exceeded all regulatory capital
requirements. United Bank is considered “well capitalized” under regulatory
requirements.
As
of June 30, 2008:
|
|
|
|
|
|
|
|
Total
risk-based capital
|
|
|
19.49 |
% |
|
|
|
|
|
Tier
1 risk-based capital
|
|
|
18.51 |
% |
|
|
|
|
|
Tier
1 (core) capital
|
|
|
12.70 |
% |
|
|
|
|
|
Tangible
equity
|
|
|
12.70 |
% |
|
|
|
|
|
As
of December 31, 2007:
|
|
|
|
|
|
|
|
|
|
Total
risk-based capital
|
|
|
20.25 |
% |
|
|
|
|
|
Tier
1 risk-based capital
|
|
|
19.25 |
% |
|
|
|
|
|
Tier
1 (core) capital
|
|
|
14.00 |
% |
|
|
|
|
|
Tangible
equity
|
|
|
14.00 |
% |
|
|
|
|
|
ITEM
3. 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.”
ITEM
4. Controls and Procedures
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 15d-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.
PART
II. OTHER INFORMATION
ITEM
1. Legal Proceedings
At June
30, 2008, 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, 2008, 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,
2007.
ITEM
2. Unregistered Sales of Equity Securities and
Use of Proceeds
(a)
No unregistered securities were sold by the Company during the quarter ended
June 30, 2008.
(b)
Not applicable
(c)
On June 20, 2008, the Company announced that its Board of Directors has approved
a stock repurchase plan to fund awards of restricted stock contemplated under
the Company's 2008 Equity Incentive Plan, which was approved by stockholders at
the Company's 2008 Annual Meeting held on June 10, 2008. Under the plan, the
Company intends to repurchase up to 359,581 shares from time to time, depending
on market conditions, at prevailing market prices in open-market or privately
negotiated transactions. The Company anticipates conducting such repurchases in
accordance with a Rule 10b5-1 trading plan.
The
following table provides certain information with regard to shares repurchased
by the Company in the second quarter of 2008.
|
|
|
|
|
|
|
|
(c)
|
|
|
(d)
|
|
|
|
|
|
|
|
|
|
Total
Number of
|
|
|
Maximum
Number
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
(or
Approximate
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(or
Units)
|
|
|
Dollar
Value) of
|
|
|
|
Total
Number
|
|
|
Average
Price
|
|
|
Purchased
as Part
|
|
|
Shares
(or Units) that
|
|
|
of
Shares
|
|
|
Paid
Per
|
|
|
of
Publicly
|
|
|
May
Yet Be
|
|
|
|
(or
Units)
|
|
|
Share
|
|
|
Announced
Plans
|
|
|
Purchased
Under the
|
Period:
|
|
Purchased
|
|
|
(or
Unit)
|
|
|
or
Programs
|
|
|
Plans
or Programs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April
1 - 30, 2008
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May
1 - 31, 2008
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
1 - 30, 2008
|
|
|
47,934 |
|
|
|
11.19 |
|
|
|
47,934 |
|
|
|
311,647 |
|
Total
|
|
|
47,934 |
|
|
$ |
11.19 |
|
|
|
47,934 |
|
|
|
|
|
ITEM
3. Defaults Upon Senior
Securities
Not
applicable.
ITEM
4. Submission of Matters to a Vote of Security
Holders
|
The
annual meeting of the stockholders of the Company was held on June 10,
2008.
|
|
|
|
|
|
|
|
|
|
|
1.
|
The
following individuals were elected as directors, each for a three-year
term by the following vote:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR
|
|
WITHHELD
|
|
|
|
|
Richard
B. Collins
|
|
14,491,491
|
|
788,279
|
|
|
|
|
G.
Todd Marchant
|
|
14,547,372
|
|
732,398
|
|
|
|
|
Michael
F. Werenski
|
|
14,549,182
|
|
730,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
terms of office of the following directors continued after the annual
meeting of stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TERM EXPIRING
|
|
|
|
|
|
|
Kevin
E. Ross
|
|
2009
|
|
|
|
|
|
|
Robert
A. Stewart, Jr.
|
|
2009
|
|
|
|
|
|
|
Thomas
H. Themistos
|
|
2009
|
|
|
|
|
|
|
Michael
F. Crowley
|
|
2010
|
|
|
|
|
|
|
Carol
Moore Cutting
|
|
2010
|
|
|
|
|
|
|
Carol
A. Leary
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.
|
The
approval of the United Financial Bancorp, Inc. 2008 Equity Incentive Plan
by the following vote:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BROKER
|
|
|
FOR
|
|
AGAINST
|
|
ABSTENTIONS
|
|
NON-VOTE
|
|
|
|
|
|
|
|
|
|
|
|
10,619,507
|
|
1,031,874
|
|
923,989
|
|
2,704,400
|
|
|
|
|
|
|
|
|
|
ITEM
5. Other Information
Not
applicable.
3.1
|
Articles
of Incorporation of United Financial Bancorp, Inc. (1)
|
3.2
|
Bylaws
of United Financial Bancorp, Inc. (2)
|
4
|
Form
of Common Stock Certificate of United Financial Bancorp, Inc.
(1)
|
10.1
|
Form
of Employee Stock Ownership Plan (3)
|
10.2
|
Employment
Agreement by and between United Bank and Richard B. Collins
(4)
|
10.3
|
Change
in Control Agreement by and between United Bank and Keith E. Harvey
(4)
|
10.4
|
Change
in Control Agreement by and between United Bank and J. Jeffrey Sullivan
(4)
|
10.5
|
Change
in Control Agreement by and between United Bank and Mark A. Roberts
(4)
|
10.6
|
United
Bank 2007 Supplemental Retirement Plan for Senior Executives
(4)
|
10.7
|
Split
Dollar Life Insurance Agreement by and between United Bank and Richard B.
Collins (5)
|
10.8
|
Split
Dollar Life Insurance Agreement by and between United Bank and Keith E.
Harvey (5)
|
10.9
|
Split
Dollar Life Insurance Agreement by and between United Bank and John J.
Patterson (5)
|
10.10
|
United
Bank 2006 Stock-Based Incentive Plan (6)
|
10.11
|
United
Bank 2008 Annual Incentive Plan (7)
|
10.12
|
United
Bank 2007 Director Retirement Plan (8)
|
10.13
|
Directors
Fee Continuation Plan (3)
|
10.14
|
Deferred
Income Agreement by and between United Bank and Donald G. Helliwell
(3)
|
10.15
|
Deferred
Income Agreement by and between United Bank and Robert W. Bozenhard, Jr.
(3)
|
10.16
|
Deferred
Income Agreement by and between United Bank and George W. Jones
(3)
|
10.17
|
United
Financial Bancorp, Inc. 2008 Equity Incentive Plan (9)
|
11
|
Statement
Regarding Computation of Per Share Earnings (refer to Note D of Part
I,
|
|
Item
1- Consolidated Financial Statements
|
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. 333-144245), originally filed with the Securities
and Exchange Commission on June 29, 2007.
|
(2)
|
Incorporated
by reference to the Form 8-K of United Financial Bancorp, Inc. filed with
the Securities and Exchange Commission on April 22,
2008.
|
(3)
|
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.
|
(4)
|
Incorporated
by reference to the Form 8-K of United Financial Bancorp, Inc. filed with
the Securities and Exchange Commission on November 29,
2007.
|
(5)
|
Incorporated
by reference to the Form 8-K of United Financial Bancorp, Inc. filed with
the Securities and Exchange Commission on January 2,
2008.
|
(6)
|
Incorporated
by reference to Appendix B to the proxy statement for the 2006 Annual
Meeting of Stockholders of United Financial Bancorp, Inc. (File No.
000-51369), filed by United Financial Bancorp, Inc. under the Securities
Exchange Act of 1934, on June 12, 2006.
|
(7)
|
Incorporated
by reference to the Form 10-K of United Financial Bancorp, Inc. filed with
the Securities and Exchange Commission on March 17,
2008.
|
(8)
|
Incorporated
by reference to the Form 8-K of United Financial Bancorp, Inc. filed with
the Securities and Exchange Commission on November 21,
2007.
|
(9)
|
Incorporated
by reference to Appendix A of the Company's Definitive Proxy Statement for
the Annual Meeting of Stockholders (File No. 000-52947), as filed with the
SEC on April 29, 2008).
|
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
8, 2008
|
By: /s/ Richard B.
Collins
|
|
Richard
B. Collins
|
|
Chairman,
President and Chief Executive Officer
|
|
|
|
|
Date:
August
8, 2008
|
By: /s/ Mark A.
Roberts
|
|
Mark
A. Roberts
|
|
Executive
Vice President and Chief Financial
Officer
|
34