form10q-100742_ubnk.htm
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
________________________
FORM
10-Q
(Mark One)
ý Quarterly
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
For
the quarterly period ended March 31, 2009
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 000-52947
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 has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes ¨ 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
16,435,070
shares outstanding as of May 4, 2009
United
Financial Bancorp, Inc.
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31
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Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
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32
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Certification
of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
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33
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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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34
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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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35
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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 share and per share amounts)
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and due from banks
|
|
$ |
10,703 |
|
|
$ |
10,356 |
|
Interest-bearing
deposits
|
|
|
1,161 |
|
|
|
3,216 |
|
Total
cash and cash equivalents
|
|
|
11,864 |
|
|
|
13,572 |
|
|
|
|
|
|
|
|
|
|
Short-term
investments
|
|
|
1,079 |
|
|
|
1,071 |
|
Securities
available for sale, at fair value
|
|
|
303,691 |
|
|
|
313,506 |
|
Securities
held to maturity, at amortized cost (fair value of $5,323
at
|
|
|
|
|
|
|
|
|
March
31, 2009 and $3,238 at December 31, 2008)
|
|
|
5,233 |
|
|
|
3,191 |
|
Loans
held for sale
|
|
|
2,710 |
|
|
|
- |
|
Loans,
net of allowance for loan losses of $8,728 at March 31,
2009
|
|
|
|
|
|
|
|
|
and
$8,250 at December 31, 2008
|
|
|
852,183 |
|
|
|
864,421 |
|
Other
real estate owned
|
|
|
739 |
|
|
|
998 |
|
Accrued
interest receivable
|
|
|
4,575 |
|
|
|
4,706 |
|
Deferred
tax asset, net
|
|
|
6,632 |
|
|
|
7,969 |
|
Stock
in the Federal Home Loan Bank of Boston
|
|
|
12,223 |
|
|
|
12,223 |
|
Banking
premises and equipment, net
|
|
|
12,012 |
|
|
|
12,125 |
|
Bank-owned
life insurance
|
|
|
27,468 |
|
|
|
27,173 |
|
Other
assets
|
|
|
2,785 |
|
|
|
2,179 |
|
TOTAL
ASSETS
|
|
$ |
1,243,194 |
|
|
$ |
1,263,134 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
Interest-bearing
|
|
$ |
682,880 |
|
|
$ |
668,485 |
|
Non-interest-bearing
|
|
|
112,441 |
|
|
|
114,178 |
|
Total
deposits
|
|
|
795,321 |
|
|
|
782,663 |
|
Federal
Home Loan Bank of Boston advances
|
|
|
186,847 |
|
|
|
208,564 |
|
Repurchase
agreements
|
|
|
30,464 |
|
|
|
28,042 |
|
Escrow
funds held for borrowers
|
|
|
2,152 |
|
|
|
1,667 |
|
Capitalized
lease obligations
|
|
|
3,109 |
|
|
|
3,129 |
|
Accrued
expenses and other liabilities
|
|
|
7,788 |
|
|
|
11,355 |
|
Total
liabilities
|
|
|
1,025,681 |
|
|
|
1,035,420 |
|
|
|
|
|
|
|
|
|
|
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 March 31, 2009 and December 31, 2008
|
|
|
178 |
|
|
|
178 |
|
Paid-in
capital
|
|
|
165,046 |
|
|
|
164,358 |
|
Retained
earnings
|
|
|
76,920 |
|
|
|
75,888 |
|
Unearned
compensation
|
|
|
(11,958 |
) |
|
|
(12,144 |
) |
Treasury
stock, at cost (1,262,377 shares at March 31, 2009 and
261,798
|
|
|
|
|
|
|
|
|
shares
at December 31, 2008)
|
|
|
(17,121 |
) |
|
|
(3,497 |
) |
Accumulated
other comprehensive income, net of taxes
|
|
|
4,448 |
|
|
|
2,931 |
|
Total
stockholders’ equity
|
|
|
217,513 |
|
|
|
227,714 |
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$ |
1,243,194 |
|
|
$ |
1,263,134 |
|
|
|
|
|
|
|
|
|
|
See notes
to unaudited consolidated financial statements
UNITED
FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF EARNINGS (unaudited)
(Dollars
in thousands, except share and per share amounts)
|
|
Three
Months Ended
|
|
|
|
March
31,
|
|
|
|
2009
|
|
|
2008
|
|
Interest
and dividend income:
|
|
|
|
|
|
|
Loans
|
|
$ |
12,051 |
|
|
$ |
12,547 |
|
Investments
|
|
|
3,871 |
|
|
|
2,618 |
|
Other
interest-earning assets
|
|
|
8 |
|
|
|
241 |
|
Total
interest and dividend income
|
|
|
15,930 |
|
|
|
15,406 |
|
|
|
|
|
|
|
|
|
|
Interest
expense:
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
3,825 |
|
|
|
4,973 |
|
Borrowings
|
|
|
1,950 |
|
|
|
1,402 |
|
Total
interest expense
|
|
|
5,775 |
|
|
|
6,375 |
|
|
|
|
|
|
|
|
|
|
Net
interest income before provision for loan losses
|
|
|
10,155 |
|
|
|
9,031 |
|
|
|
|
|
|
|
|
|
|
Provision
for loan losses
|
|
|
540 |
|
|
|
184 |
|
|
|
|
|
|
|
|
|
|
Net
interest income after provision for loan losses
|
|
|
9,615 |
|
|
|
8,847 |
|
|
|
|
|
|
|
|
|
|
Non-interest
income:
|
|
|
|
|
|
|
|
|
Fee
income on depositors’ accounts
|
|
|
1,107 |
|
|
|
1,077 |
|
Net
gain on sale of loans
|
|
|
125 |
|
|
|
- |
|
Net
gain on sale of securities
|
|
|
- |
|
|
|
8 |
|
Wealth
management income
|
|
|
132 |
|
|
|
150 |
|
Income
from bank-owned life insurance
|
|
|
314 |
|
|
|
50 |
|
Other
income
|
|
|
173 |
|
|
|
234 |
|
Total
non-interest income
|
|
|
1,851 |
|
|
|
1,519 |
|
|
|
|
|
|
|
|
|
|
Non-interest
expense:
|
|
|
|
|
|
|
|
|
Salaries
and benefits
|
|
|
4,664 |
|
|
|
4,041 |
|
Occupancy
expenses
|
|
|
665 |
|
|
|
509 |
|
Marketing
expenses
|
|
|
342 |
|
|
|
358 |
|
Data
processing expenses
|
|
|
844 |
|
|
|
719 |
|
Professional
fees
|
|
|
423 |
|
|
|
443 |
|
FDIC
insurance assessment
|
|
|
340 |
|
|
|
21 |
|
Other
expenses
|
|
|
877 |
|
|
|
1,085 |
|
Total
non-interest expense
|
|
|
8,155 |
|
|
|
7,176 |
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
3,311 |
|
|
|
3,190 |
|
|
|
|
|
|
|
|
|
|
Income
tax expense
|
|
|
1,188 |
|
|
|
1,224 |
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
2,123 |
|
|
$ |
1,966 |
|
|
|
|
|
|
|
|
|
|
Earnings
per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.14 |
|
|
$ |
0.12 |
|
Diluted
|
|
$ |
0.14 |
|
|
$ |
0.12 |
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
15,220,014 |
|
|
|
16,230,847 |
|
Diluted
|
|
|
15,366,790 |
|
|
|
16,271,404 |
|
See notes to unaudited consolidated
financial statements.
UNITED
FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY AND
COMPREHENSIVE
INCOME (unaudited)
FOR THE
THREE MONTHS ENDED MARCH 31, 2009 and 2008
(Dollars
in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Shares
|
|
|
Common
|
|
|
Paid-In
|
|
|
Retained
|
|
|
Unearned
|
|
|
Treasury
|
|
|
Comprehensive
|
|
|
|
|
|
|
Outstanding
|
|
|
Stock
|
|
|
Capital
|
|
|
Earnings
|
|
|
Compensation
|
|
|
Stock
|
|
|
Income
(Loss)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances
at December 31, 2007
|
|
|
17,763,747 |
|
|
$ |
178 |
|
|
$ |
165,920 |
|
|
$ |
73,026 |
|
|
$ |
(12,835 |
) |
|
$ |
- |
|
|
$ |
(169 |
) |
|
$ |
226,120 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,966 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,966 |
|
Other
comprehensive income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
768 |
|
|
|
768 |
|
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
costs from issuance of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
pursuant
to second-step conversion
|
|
|
- |
|
|
|
- |
|
|
|
(26 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(26 |
) |
Cash
dividends paid ($0.06 per share)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(987 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(987 |
) |
Stock-based
compensation
|
|
|
- |
|
|
|
- |
|
|
|
375 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
375 |
|
ESOP
shares committed to be released
|
|
|
- |
|
|
|
- |
|
|
|
20 |
|
|
|
- |
|
|
|
176 |
|
|
|
- |
|
|
|
- |
|
|
|
196 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances
at March 31, 2008
|
|
|
17,763,747 |
|
|
$ |
178 |
|
|
$ |
166,289 |
|
|
$ |
74,005 |
|
|
$ |
(12,659 |
) |
|
$ |
- |
|
|
$ |
599 |
|
|
$ |
228,412 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances
at December 31, 2008
|
|
|
17,501,949 |
|
|
$ |
178 |
|
|
$ |
164,358 |
|
|
$ |
75,888 |
|
|
$ |
(12,144 |
) |
|
$ |
(3,497 |
) |
|
$ |
2,931 |
|
|
$ |
227,714 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,123 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,123 |
|
Other
comprehensive income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,517 |
|
|
|
1,517 |
|
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
dividends paid ($0.07 per share)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,091 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,091 |
) |
Treasury
stock purchases
|
|
|
(1,000,579 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
(13,624 |
) |
|
|
|
|
|
|
(13,624 |
) |
Stock-based
compensation
|
|
|
- |
|
|
|
- |
|
|
|
621 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
621 |
|
ESOP
shares committed to be released
|
|
|
- |
|
|
|
- |
|
|
|
67 |
|
|
|
- |
|
|
|
186 |
|
|
|
- |
|
|
|
- |
|
|
|
253 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances
at March 31, 2009
|
|
|
16,501,370 |
|
|
$ |
178 |
|
|
$ |
165,046 |
|
|
$ |
76,920 |
|
|
$ |
(11,958 |
) |
|
$ |
(17,121 |
) |
|
$ |
4,448 |
|
|
$ |
217,513 |
|
The
components of other comprehensive income and related tax effects are as
follows:
|
|
Three
Months Ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Change
in unrealized holding gains on available-for-sale
securities
|
|
$ |
2,461 |
|
|
$ |
1,225 |
|
Reclassification
adjustment for gains realized in income
|
|
|
- |
|
|
|
(8 |
) |
Net
change in unrealized gains
|
|
|
2,461 |
|
|
|
1,217 |
|
|
|
|
|
|
|
|
|
|
Tax
effect
|
|
|
944 |
|
|
|
449 |
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income
|
|
$ |
1,517 |
|
|
$ |
768 |
|
|
|
|
|
|
|
|
|
|
See notes to unaudited consolidated
financial statements.
UNITED
FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF CASH FLOWS (unaudited)
FOR THE
THREE MONTHS ENDED MARCH 31, 2009 and 2008
|
|
2009
|
|
|
2008
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
income
|
|
$ |
2,123 |
|
|
$ |
1,966 |
|
Adjustments
to reconcile net income to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Provision
for loan losses
|
|
|
540 |
|
|
|
184 |
|
ESOP
expense
|
|
|
253 |
|
|
|
196 |
|
Stock-based
compensation
|
|
|
621 |
|
|
|
375 |
|
Amortization
of premiums and discounts
|
|
|
93 |
|
|
|
32 |
|
Depreciation
and amortization
|
|
|
250 |
|
|
|
194 |
|
Amortization
of intangible assets
|
|
|
6 |
|
|
|
8 |
|
Net
loss on sale of other real estate owned
|
|
|
7 |
|
|
|
- |
|
Net
gain on sale of securities
|
|
|
- |
|
|
|
(8 |
) |
Net
gain on sale of loans
|
|
|
(125 |
) |
|
|
- |
|
Increase
in cash surrender value of bank-owned life insurance
|
|
|
(295 |
) |
|
|
(81 |
) |
Decrease
(increase) in accrued interest receivable
|
|
|
131 |
|
|
|
(103 |
) |
Increase
in other assets
|
|
|
(218 |
) |
|
|
(2,104 |
) |
Decrease
in accrued expenses and other liabilities
|
|
|
(3,896 |
) |
|
|
(2,887 |
) |
Net
cash used in operating activities
|
|
|
(510 |
) |
|
|
(2,228 |
) |
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchases
of securities available for sale
|
|
|
(4,599 |
) |
|
|
(116,039 |
) |
Proceeds
from sales of securities available for sale
|
|
|
- |
|
|
|
26,434 |
|
Proceeds
from maturities, calls and principal repayments of securities available
for sale
|
|
|
16,782 |
|
|
|
29,090 |
|
Purchases
of securities held to maturity
|
|
|
(2,043 |
) |
|
|
- |
|
Investment
in short term time deposits
|
|
|
(8 |
) |
|
|
(13 |
) |
Proceeds
from sales of other real estate owned
|
|
|
268 |
|
|
|
- |
|
Net
loan originations and principal repayments
|
|
|
(1,830 |
) |
|
|
(729 |
) |
Proceeds
from sales of loans
|
|
|
10,927 |
|
|
|
- |
|
Purchases
of property and equipment
|
|
|
(134 |
) |
|
|
(170 |
) |
Cash
paid to acquire Levine Financial Group
|
|
|
(92 |
) |
|
|
- |
|
Net
cash provided by (used in) investing activities
|
|
|
19,271 |
|
|
|
(61,427 |
) |
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Net
increase in deposits
|
|
|
12,658 |
|
|
|
36,842 |
|
Net
(decrease) increase in short-term borrowings from Federal Home Loan Bank
of Boston
|
|
|
(19,000 |
) |
|
|
11,145 |
|
Proceeds
of Federal Home Loan Bank of Boston long-term advances
|
|
|
- |
|
|
|
25,000 |
|
Repayments
of Federal Home Loan Bank of Boston long-term advances
|
|
|
(2,717 |
) |
|
|
(2,733 |
) |
Net
increase (decrease) in repurchase agreements
|
|
|
2,422 |
|
|
|
(4,178 |
) |
Net
increase in escrow funds held for borrowers
|
|
|
485 |
|
|
|
158 |
|
Treasury
stock purchases
|
|
|
(13,163 |
) |
|
|
- |
|
Cash
dividends paid
|
|
|
(1,091 |
) |
|
|
(987 |
) |
Costs
from issuance of common stock pursuant to second-step
conversion
|
|
|
- |
|
|
|
(26 |
) |
Payments
on capitalized lease obligations
|
|
|
(63 |
) |
|
|
(36 |
) |
Net
cash (used in) provided by financing activities
|
|
|
(20,469 |
) |
|
|
65,185 |
|
(Decrease)
increase in cash and cash equivalents
|
|
|
(1,708 |
) |
|
|
1,530 |
|
Cash
and cash equivalents at beginning of period
|
|
|
13,572 |
|
|
|
14,254 |
|
Cash
and cash equivalents at end of period
|
|
$ |
11,864 |
|
|
$ |
15,784 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow
Information:
|
|
|
|
|
|
|
|
|
Cash
paid during the period:
|
|
|
|
|
|
|
|
|
Interest
on deposits, borrowings and other interest bearing
liabilities
|
|
$ |
5,741 |
|
|
$ |
6,349 |
|
Income
taxes – net
|
|
|
4,600 |
|
|
|
5,801 |
|
Non-cash
items:
|
|
|
|
|
|
|
|
|
Transfer
of loans to other real estate owned
|
|
|
- |
|
|
|
150 |
|
Trade
date accounting for securities purchased
|
|
|
- |
|
|
|
8,410 |
|
Trade
date accounting for treasury stock purchases
|
|
|
461 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
See notes to unaudited consolidated
financial statements.
UNITED
FINANCIAL BANCORP, INC. AND SUBSIDIARY
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2009
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 March 31, 2009 and the results of operations for the three
months ended March 31, 2009 and 2008. 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, 2008 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 13, 2009.
Amounts
reported for prior periods are reclassified as necessary to conform to the
current period presentation.
NOTE
B – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In
February 2008, the Financial Accounting Standards Board
(“FASB”) issued FASB Staff Position (“FSP”) 157-2, “Effective Date of
FASB Statement No. 157,” which permits a one-year deferral in applying the
measurement provisions of Statement of Financial Accounting Standard (“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. The
adoption of FSP 157-2 on January 1, 2009, had no material effect on the
Company’s Consolidated Financial Statements.
In April
2009, the FASB issued FSP 157-4 “Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly (“FSP FAS 157-4”),” which provides
additional guidance for estimating fair value in accordance with SFAS No. 157,
“Fair Value Measurements”, when the volume and level of activity for the asset
or liability have significantly decreased. This FSP also includes guidance on
identifying circumstances that indicate a transaction is not
orderly. This FSP emphasizes that even if there has been a
significant decrease in the volume and level of activity for the asset or
liability and regardless of the valuation technique(s) used, the objective of a
fair value measurement remains the same. Fair value is the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction (that is, not a forced liquidation or distressed sale) between
market participants at the measurement date under current market conditions. FSP
FAS 157-4 is effective for interim periods ending after June 15, 2009, with
early adoption permitted for periods ending after March 15, 2009. The
Company will adopt FSP FAS 157-4 in the second quarter of 2009 and is currently
evaluating the impact, if any, it will have on its Consolidated Financial
Statements.
In April
2009, the FASB issued FSP FAS 115-2 and FAS 124-2 “Recognition and Presentation
of Other-Than-Temporary Impairments (“FSP FAS 115-2”),” in which the objective
of an other-than-temporary impairment analysis under existing U.S. GAAP is to
determine whether the holder of an investment in a debt or equity security for
which changes in fair value are not regularly recognized in earnings (such as
securities classified as held-to-maturity or available-for-sale) should
recognize a loss in earnings when the investment is impaired. An investment is
impaired if the fair value of the investment is less than its amortized cost
basis. This FSP amends the other-than-temporary impairment guidance
in U.S. GAAP for debt securities to make the guidance more operational and to
improve the presentation and disclosure of other-than-temporary impairments on
debt and equity securities in the financial statements. This FSP does not amend
existing recognition and measurement guidance related to other-than-temporary
impairments of equity securities. FSP FAS 115-2 is effective for
interim periods ending after June 15, 2009, with early adoption permitted for
periods ending after March 15, 2009. The Company will adopt FSP FAS 115-2 in the
second quarter of 2009 and is currently evaluating the impact, if any, it will
have on its Consolidated Financial Statements.
In April
2009, the FASB issued FSP FAS 107-1 and APB 28-1 “Interim Disclosures about Fair
Value of Financial Instruments (“FSP FAS 107”),” which amends SFAS No. 107,
“Disclosures about Fair Value of Financial Instruments,” to require disclosures
about fair value of financial instruments for interim reporting periods of
publicly traded companies as well as in annual financial statements. This FSP
also amends APB Opinion No. 28, “Interim Financial Reporting,” to require those
disclosures in summarized financial information at interim reporting periods and
is effective for interim periods ending after June 15, 2009, with early adoption
permitted for periods ending after March 15, 2009. The Company will adopt FSP
FAS 107-1 in the second quarter of 2009 and is currently evaluating the impact,
if any, it will have on its Consolidated Financial Statements.
NOTE
C – CRITICAL ACCOUNTING POLICIES
Critical
accounting policies are those that involve significant judgments and assumptions
by management and that have, or could have, a material impact on our income or
the carrying value of our assets. Our critical accounting policies
are those related to our allowance for loan losses and the evaluation of the
investment portfolio for other-than-temporary impairment (“OTTI”).
Allowance for
Loan Losses. The allowance for loan
losses is the amount estimated by management as necessary to cover credit losses
inherent in the loan portfolio at the balance sheet date. The
allowance is established through the provision for loan losses which is charged
against income. The methodology for determining the allowance for
loan losses is considered a critical accounting policy by management due to the
high degree of judgment involved, the subjectivity of the assumptions utilized
and the potential for changes in the economic environment that could result in
adjustments to the amount of the recorded allowance for loan
losses.
As a
substantial amount of our loan portfolio is collateralized by real estate,
appraisals of the underlying value of property securing loans and discounted
cash flow valuations of properties are critical in determining the amount of the
allowance required for specific loans. Assumptions for appraisals and
discounted cash flow valuations are instrumental in determining the value of
properties. Overly optimistic assumptions or negative changes to
assumptions could significantly affect the valuation of a property securing a
loan and the related allowance determined. The assumptions supporting
such appraisals and discounted cash flow valuations are reviewed by management
to determine that the resulting values reasonably reflect amounts realizable on
the related loans.
Management
performs a quarterly evaluation of the adequacy of the allowance for loan
losses. We consider a variety of factors in establishing this
estimate including, but not limited to, current economic conditions, delinquency
statistics, geographic and industry concentrations, the adequacy of the
underlying collateral, the financial strength of the borrower, results of
internal loan reviews and other relevant factors. This evaluation is
inherently subjective as it requires material estimates by management that may
be susceptible to significant change based on changes in economic and real
estate market conditions.
The
allowance has a specific and general component. The specific component relates
to loans that are delinquent or otherwise identified as potential problem loans
through the application of our loan review process and our loan grading system.
All such loans are evaluated individually, with principal consideration given to
the value of the collateral securing the loans. Specific allowances are
established as required by this analysis. The general component is determined by
segregating the remaining loans by type of loan, credit grade and payment
history. We also analyze historical loss experience, delinquency
trends, general economic conditions and geographic and industry
concentrations. This analysis establishes factors that are applied to
the loan groups to determine the amount of the general component of the
allowance for loan losses.
Actual
loan losses may be significantly more than the allowances we have established
which could have a material negative effect on our financial results in future
periods.
Evaluation of the
Investment Portfolio for Other-Than-Temporary Impairment. The
evaluation of the investment portfolio for other-than-temporary impairment is
also a critical accounting estimate. In evaluating the investment
portfolio for other-than-temporary impairment, management considers the issuer’s
credit rating, credit outlook, payment status and financial condition, the
length of time the security has been in a loss position, the size of the loss
position and other meaningful information. If a decline in the fair
value of an investment security below its cost is judged to be
other-than-temporary the cost basis of the investment security is written down
to fair value as a new cost basis and the amount of the write-down is included
in the results of operations. A number of factors or combinations of
factors could cause us to conclude in one or more future reporting periods that
an unrealized loss that exists with respect to these securities constitutes an
impairment that is other than temporary. These factors include, but are not
limited to, failure to make scheduled principal and/or interest payments, an
increase in the severity of the unrealized loss on a particular security, an
increase in the continuous duration of the unrealized loss without an
improvement in value or changes in market conditions and/or industry or issuer
specific factors that would render us unable to forecast a full recovery in
value.
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
|
|
|
|
March
31,
|
|
|
|
2009
|
|
|
2008
|
|
Net
income
|
|
$ |
2,123 |
|
|
$ |
1,966 |
|
Weighted
average common shares applicable to
|
|
|
|
|
|
|
|
|
basic EPS
|
|
|
15,220,014 |
|
|
|
16,230,847 |
|
Effect of dilutive potential
common shares (1, 2)
|
|
|
146,776 |
|
|
|
40,557 |
|
Weighted
average common shares applicable to
|
|
|
|
|
|
|
|
|
diluted EPS
|
|
|
15,366,790 |
|
|
|
16,271,404 |
|
|
|
|
|
|
|
|
|
|
Earnings
per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.14 |
|
|
$ |
0.12 |
|
Diluted
|
|
$ |
0.14 |
|
|
$ |
0.12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
For the three months ended March 31, 2009 and March 31, 2008,
options to purchase 1,295,863 and 785,275 shares,
respectively, were outstanding but not included in the computation of
earnings per share because they were
antidilutive.
|
(2)
Includes incremental shares related to stock options and restricted
stock.
|
|
NOTE
E – INVESTMENT SECURITIES
The
amortized cost and fair value of securities classified as available for sale and
held to maturity are as follows:
|
|
Amortized
|
|
|
Unrealized
|
|
|
|
|
|
|
Cost
|
|
|
Gain
|
|
|
Losses
|
|
|
Fair
Value
|
|
Securities Available for
Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Government-sponsored
enterprises
|
|
$ |
444 |
|
|
$ |
- |
|
|
$ |
(2 |
) |
|
$ |
442 |
|
Mortgage-backed
securities
|
|
|
282,574 |
|
|
|
9,376 |
|
|
|
(67 |
) |
|
|
291,883 |
|
Municipal
bonds
|
|
|
10,504 |
|
|
|
98 |
|
|
|
(246 |
) |
|
|
10,356 |
|
Corporate
bonds
|
|
|
1,536 |
|
|
|
- |
|
|
|
(526 |
) |
|
|
1,010 |
|
Total
securities available for sale
|
|
$ |
295,058 |
|
|
$ |
9,474 |
|
|
$ |
(841 |
) |
|
$ |
303,691 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government-sponsored
enterprises
|
|
$ |
467 |
|
|
$ |
- |
|
|
$ |
(2 |
) |
|
$ |
465 |
|
Mortgage-backed
securities
|
|
|
294,824 |
|
|
|
6,601 |
|
|
|
(314 |
) |
|
|
301,111 |
|
Municipal
bonds
|
|
|
10,504 |
|
|
|
83 |
|
|
|
(195 |
) |
|
|
10,392 |
|
Corporate
bonds
|
|
|
1,538 |
|
|
|
- |
|
|
|
- |
|
|
|
1,538 |
|
Total
securities available for sale
|
|
$ |
307,333 |
|
|
$ |
6,684 |
|
|
$ |
(511 |
) |
|
$ |
313,506 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
|
|
|
|
|
Cost
|
|
|
Gain
|
|
|
Losses
|
|
|
Fair
Value
|
|
Securities Held to Maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed
securities
|
|
$ |
2,043 |
|
|
$ |
31 |
|
|
$ |
- |
|
|
$ |
2,074 |
|
IRB
|
|
|
1,122 |
|
|
|
- |
|
|
|
- |
|
|
|
1,122 |
|
Municipal
bonds
|
|
|
2,068 |
|
|
|
59 |
|
|
|
- |
|
|
|
2,127 |
|
Total
|
|
$ |
5,233 |
|
|
$ |
90 |
|
|
$ |
- |
|
|
$ |
5,323 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IRB
|
|
$ |
1,122 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
1,122 |
|
Municipal
bonds
|
|
|
2,069 |
|
|
|
49 |
|
|
|
(2 |
) |
|
|
2,116 |
|
Total
|
|
$ |
3,191 |
|
|
$ |
49 |
|
|
$ |
(2 |
) |
|
$ |
3,238 |
|
The
Company’s portfolio of mortgage-backed securities, which represent interests in
pools of residential mortgage
loans, consists solely of securities issued by the Federal Home Loan Mortgage
Corporation (Freddie Mac), the Federal National Mortgage Association (Fannie
Mae), and the Government National Mortgage Association (Ginnie Mae), all of
which are federal government owned or sponsored enterprises.
Management
has determined that no declines in the fair value of its securities portfolio
are deemed to be other-than temporary for the first quarter of 2009. In its
evaluation, management considered the types of securities, including if the
securities were U.S. Government issued, the credit rating on the securities,
credit outlook, payment status and financial condition, the length of time the
bond has been in a loss position, the size of the loss position and other
meaningful information. The Company has the ability to hold these securities
until the earlier of maturity or a market price recovery and currently has no
plans to dispose of any of these securities.
At March
31, 2009, the Company’s available for sale municipal bond portfolio had a net
unrealized loss of $148,000, or 1.4% of amortized cost. Management
believes that these unrealized losses are primarily due to the current credit
and liquidity crises, which have led to a significant widening in spreads.
Management believes that these market conditions will not affect the expected
cash flows of the issuer. All of the Company’s municipal bonds are rated upper
medium grade or higher by one of the rating agencies, with the exception of two
securities, and continue to perform in accordance with contractual
terms. Although conditions in the insurance market have deteriorated,
management also considers the underlying guarantee of its municipal bonds based
upon the insurer’s rating and current financial condition. Because
the Company has the ability and intent to hold these securities to the
forecasted maturity or recovery date and expects to collect all amounts due
according to the contractual terms, no additional declines since December 31,
2008 were deemed to be other than temporary.
The
Company’s variable rate trust preferred securities portfolio has an unrealized
loss of $526,000, equal to 34.2% of amortized cost, at March 31, 2009. The
Company holds two securities issued by large national banks, both of which have
investment-grade credit ratings, and have received investments from the U.S.
Treasury’s Troubled Asset Relief Program Capital Purchase Program. The Company
also holds a pooled trust preferred security with an investment-grade credit
rating. The pool is well diversified geographically and the largest single
issuer within the pool represents less than 4% of total holdings. The Company
owns the AA tranche, which maintains significant coverage for principal defaults
and temporary interest shortfalls. Because the Company has the ability and
intent to hold these securities to the forecasted maturity or recovery date and
expects to collect all amounts due according to the contractual terms, no
additional declines since December 31, 2008 are deemed to be other than
temporary.
NOTE
F – LOANS
The
components of loans held for investment were as follows at March 31, 2009 and
December 31, 2008:
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Residential
mortgages
|
|
$ |
346,590 |
|
|
$ |
356,428 |
|
Commercial
real estate
|
|
|
256,248 |
|
|
|
248,457 |
|
Construction
|
|
|
27,905 |
|
|
|
32,082 |
|
Home
equity
|
|
|
119,024 |
|
|
|
120,724 |
|
Commercial
and industrial
|
|
|
82,674 |
|
|
|
84,919 |
|
Automobile
|
|
|
16,204 |
|
|
|
17,332 |
|
Consumer
|
|
|
10,034 |
|
|
|
10,334 |
|
Total
loans
|
|
|
858,679 |
|
|
|
870,276 |
|
|
|
|
|
|
|
|
|
|
Net
deferred loan costs and fees
|
|
|
2,232 |
|
|
|
2,395 |
|
Allowance
for loan losses
|
|
|
(8,728 |
) |
|
|
(8,250 |
) |
Loans,
net
|
|
$ |
852,183 |
|
|
$ |
864,421 |
|
NOTE
G – NON-PERFORMING ASSETS
The table
below sets forth the amounts and categories of non-performing assets at March
31, 2009 and December 31, 2008:
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Non-accrual
loans:
|
|
|
|
|
|
|
Residential
mortgages
|
|
$ |
952 |
|
|
$ |
1,244 |
|
Commercial
mortgages
|
|
|
2,083 |
|
|
|
2,544 |
|
Construction
|
|
|
634 |
|
|
|
444 |
|
Home
equity
|
|
|
3 |
|
|
|
- |
|
Commercial
and industrial
|
|
|
521 |
|
|
|
425 |
|
Other
consumer
|
|
|
140 |
|
|
|
140 |
|
Total
non-accrual loans
|
|
|
4,333 |
|
|
|
4,797 |
|
|
|
|
|
|
|
|
|
|
Other
real estate owned
|
|
|
739 |
|
|
|
998 |
|
Total
non-performing assets
|
|
$ |
5,072 |
|
|
$ |
5,795 |
|
|
|
|
|
|
|
|
|
|
Ratios:
|
|
|
|
|
|
|
|
|
Total
non-performing loans to total loans
|
|
|
0.50 |
% |
|
|
0.55 |
% |
Total
non-performing assets to total assets
|
|
|
0.41 |
% |
|
|
0.46 |
% |
|
|
|
|
|
|
|
|
|
NOTE
H – ALLOWANCE FOR LOAN LOSSES
A summary
of the activity in the allowance for loan losses is as follows:
|
|
For
the Three Months Ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Balance
at beginning of period
|
|
$ |
8,250 |
|
|
$ |
7,714 |
|
Provision
for loan losses
|
|
|
540 |
|
|
|
184 |
|
Charge-offs:
|
|
|
|
|
|
|
|
|
Commercial
mortgages
|
|
|
- |
|
|
|
(6 |
) |
Construction
|
|
|
(65 |
) |
|
|
(90 |
) |
Home
equity
|
|
|
- |
|
|
|
(42 |
) |
Commercial
and industrial
|
|
|
(39 |
) |
|
|
(114 |
) |
Automobile
|
|
|
(5 |
) |
|
|
- |
|
Other
consumer
|
|
|
(1 |
) |
|
|
(1 |
) |
Total
charge-offs
|
|
|
(110 |
) |
|
|
(253 |
) |
Recoveries:
|
|
|
|
|
|
|
|
|
Commercial
and industrial
|
|
|
47 |
|
|
|
- |
|
Automobile
|
|
|
1 |
|
|
|
1 |
|
Total
recoveries
|
|
|
48 |
|
|
|
1 |
|
Net
charge-offs
|
|
|
(62 |
) |
|
|
(252 |
) |
Balance
at end of period
|
|
$ |
8,728 |
|
|
$ |
7,646 |
|
Ratios:
|
|
|
|
|
|
|
|
|
Net
charge-offs to average loans
|
|
|
|
|
|
|
|
|
outstanding
(annualized)
|
|
|
0.03 |
% |
|
|
0.12 |
% |
Allowance
for loan losses to non-performing
|
|
|
|
|
|
|
|
|
loans
at end of period
|
|
|
201.43 |
% |
|
|
285.41 |
% |
Allowance
for loan losses to total
|
|
|
|
|
|
|
|
|
loans
at end of period
|
|
|
1.01 |
% |
|
|
0.93 |
% |
|
|
|
|
|
|
|
|
|
NOTE
I – COMMITMENTS
Financial
instruments with off-balance sheet risk at March 31, 2009 and December 31, 2008
were as follows:
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Unused
lines of credit
|
|
$ |
159,003 |
|
|
$ |
155,448 |
|
Amounts
due mortgagors
|
|
|
23,209 |
|
|
|
14,479 |
|
Standby
letters of credit
|
|
|
1,082 |
|
|
|
1,156 |
|
Commitments
to originate loans
|
|
|
14,386 |
|
|
|
10,458 |
|
The
Company has a commitment to invest up to $1.0 million in a venture capital fund.
As of March 31, 2009 the Company has contributed $150,000 to the
fund.
NOTE
J – DEPOSITS
Deposit accounts, by type, are
summarized as follows at March 31, 2009 and December 31,
2008:
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Demand
|
|
$ |
112,441 |
|
|
$ |
114,178 |
|
NOW
|
|
|
33,990 |
|
|
|
32,390 |
|
Savings
|
|
|
114,341 |
|
|
|
99,492 |
|
Money
market
|
|
|
173,717 |
|
|
|
160,736 |
|
Certificates
of deposit
|
|
|
360,832 |
|
|
|
375,867 |
|
|
|
$ |
795,321 |
|
|
$ |
782,663 |
|
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 Consolidated Financial
Statements.
NOTE
L - FAIR VALUES OF ASSETS AND LIABILITIES
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, other U.S.
government and government-sponsored enterprises 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
measured at fair value on a recurring basis, are summarized below:
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Fair
Value
|
|
At March 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
available for sale
|
|
$ |
442 |
|
|
$ |
301,947 |
|
|
$ |
1,302 |
|
|
$ |
303,691 |
|
Mortgage
servicing rights
|
|
|
- |
|
|
|
- |
|
|
|
184 |
|
|
|
184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
442 |
|
|
$ |
301,947 |
|
|
$ |
1,486 |
|
|
$ |
303,875 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
available for sale
|
|
$ |
465 |
|
|
$ |
311,209 |
|
|
$ |
1,832 |
|
|
$ |
313,506 |
|
Mortgage
servicing rights
|
|
|
- |
|
|
|
- |
|
|
|
124 |
|
|
|
124 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
465 |
|
|
$ |
311,209 |
|
|
$ |
1,956 |
|
|
$ |
313,630 |
|
The
Company had no liabilities measured at fair value on a recurring basis at March
31, 2009.
The table
below presents the changes in Level 3 assets measured at fair value on a
recurring basis for the three months ended March 31, 2009.
Balance
at December 31, 2008
|
|
$ |
1,956 |
|
Total
realized/unrealized losses included in net income
|
|
|
(13 |
) |
Change
in unrealized loss
|
|
|
(530 |
) |
Purchases,
sales, issuances and settlements
|
|
|
73 |
|
Transfers
in and out of Level 3
|
|
|
- |
|
Balance
at March 31, 2009
|
|
$ |
1,486 |
|
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 at fair value certain
other financial and non-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. The
following table summarizes the fair value hierarchy used to determine the
adjustment and the carrying value of the related individual asset for the three
months ended March 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31, 2009
|
|
|
|
At
March 31, 2009
|
|
|
|
|
|
Total
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Gains/(Losses)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$ |
- |
|
|
$ |
4,333 |
|
|
$ |
- |
|
|
$ |
(213 |
) |
Other
real estate owned
|
|
|
- |
|
|
|
739 |
|
|
|
- |
|
|
|
(7 |
) |
Other
assets
|
|
|
- |
|
|
|
- |
|
|
|
1,370 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
- |
|
|
$ |
5,072 |
|
|
$ |
1,370 |
|
|
$ |
(220 |
) |
The
amount of loans represents the carrying value and related write-down and
valuation allowance of impaired loans for which adjustments are based on the
estimated fair value of the underlying collateral. The other real estate owned
amount represents the carrying value for which adjustments are also based on the
estimated fair value of the property. Other assets consist of equity securities
accounted for at cost which approximates fair value.
NOTE
M – PENSION AND POSTRETIREMENT BENEFIT PLANS
The
Company maintains a Senior Executive Retirement Plan and a Director Retirement
Plan. These plans had no assets at March 31, 2009 and 2008. The following table
presents the components of the net periodic benefit cost:
|
|
For
the Three Months Ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
Director
|
|
|
|
|
|
Director
|
|
|
|
|
|
|
Retirement
|
|
|
|
|
|
Retirement
|
|
|
|
SERP
|
|
|
Plan
|
|
|
SERP
|
|
|
Plan
|
|
Periodic
benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
cost
|
|
$ |
69 |
|
|
$ |
15 |
|
|
$ |
76 |
|
|
$ |
14 |
|
Interest
cost
|
|
|
35 |
|
|
|
9 |
|
|
|
34 |
|
|
|
8 |
|
Total
pension cost
|
|
|
104 |
|
|
|
24 |
|
|
|
110 |
|
|
|
22 |
|
Prior
service cost amortization
|
|
|
19 |
|
|
|
9 |
|
|
|
19 |
|
|
|
9 |
|
Net
loss amortization
|
|
|
- |
|
|
|
- |
|
|
|
6 |
|
|
|
- |
|
Net
periodic benefit cost
|
|
$ |
123 |
|
|
$ |
33 |
|
|
$ |
135 |
|
|
$ |
31 |
|
Benefits
expected to be paid over the next five years as presented in the 2008 10K have
not changed. As these Plans are not funded, the Company does not expect to
contribute assets to these plans in 2009.
NOTE
N – SUBSEQUENT EVENT
On April
16, 2009, the Board of Directors declared a cash dividend of $0.07 per
share. The dividend is payable on June 1, 2009 to stockholders of
record as of May 8, 2009.
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 March 31, 2009 and December 31, 2008
Total
assets decreased $19.9 million, or 1.6%, to $1.24 billion at March 31, 2009 from
$1.26 billion at December 31, 2008 due to decreases in securities available for
sale and loans. Securities available for sale decreased $9.8 million, or 3.1%,
to $303.7 million at March 31, 2009 from $313.5 million at December 31, 2008,
mainly due to principal repayments of existing securities. Total
loans decreased $8.9 million, or 1.0%, to $861.4 million at March 31,
2009 from $870.3 million at December 31, 2008, due to prepayment and
refinancing activity, slower origination volume and the impact of the sales of
$10.8 million of lower-coupon, fixed-rate residential mortgages during the
quarter. The cash flows received from the investment and loan portfolios were
used to pay down Federal Home Loan Bank advances and to fund the repurchase of
the Company’s common stock.
Total deposits increased
$12.7 million, or 1.6%, to $795.3 million at March 31, 2009 compared to $782.7
million at December 31, 2008 mainly due to growth in core account balances,
partially offset by runoff in certificates of deposit. Core deposit balances
grew $27.7 million, or 6.8%, to $434.5 million at March 31, 2009 from $406.8
million at December 31, 2008 reflecting competitive products and pricing,
excellent customer service, and targeted promotional activities. The increase in
core deposits were partially offset by a decrease in certificates of deposit of
$15.0 million, or 4.0%, to $360.8 at March 31, 2009 compared to $375.9 million
at December 31, 2008. Federal Home Loan Bank advances were reduced by
$21.7 million, or 10.4%, to $186.8 million at March 31, 2009 from $208.6 million
at December 31, 2008 reflecting pay downs of overnight borrowings utilizing cash
flows from the investment and loan portfolios.
Total
stockholders’ equity decreased $10.2 million, or 4.5%, to $217.5 million at
March 31, 2009 from $227.7 million at December 31, 2008 as a result of
repurchases of our common stock totaling $13.6 million and cash dividend
payments amounting to $1.1 million. These decreases were partially offset by net
income of $2.1 million for the three months ended March 31, 2009, an increase of
$1.5 million in net unrealized gains on securities available for sale,
stock-based compensation expense totaling $621,000 and ESOP compensation expense
of $253,000.
Credit
Quality
The
Company actively manages credit risk 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 $5.1 million, or 0.41% of total assets, at March 31, 2009 compared
to $5.8 million, or 0.46% of total assets, at December 31, 2008.
Delinquent Loans.
The following table sets forth our loan delinquencies 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 March 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
mortgages
|
|
|
4 |
|
|
$ |
1,009 |
|
|
|
6 |
|
|
$ |
952 |
|
|
|
10 |
|
|
$ |
1,961 |
|
Commercial
mortgages
|
|
|
7 |
|
|
|
1,763 |
|
|
|
10 |
|
|
|
2,083 |
|
|
|
17 |
|
|
|
3,846 |
|
Construction
|
|
|
2 |
|
|
|
168 |
|
|
|
4 |
|
|
|
634 |
|
|
|
6 |
|
|
|
802 |
|
Home
equity
|
|
|
3 |
|
|
|
137 |
|
|
|
1 |
|
|
|
3 |
|
|
|
4 |
|
|
|
140 |
|
Commercial
and industrial
|
|
|
7 |
|
|
|
278 |
|
|
|
18 |
|
|
|
521 |
|
|
|
25 |
|
|
|
799 |
|
Automobile
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Other
consumer
|
|
|
1 |
|
|
|
40 |
|
|
|
2 |
|
|
|
140 |
|
|
|
3 |
|
|
|
180 |
|
Total
|
|
|
24 |
|
|
$ |
3,395 |
|
|
|
41 |
|
|
$ |
4,333 |
|
|
|
65 |
|
|
$ |
7,728 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
mortgages
|
|
|
7 |
|
|
$ |
939 |
|
|
|
7 |
|
|
$ |
1,244 |
|
|
|
14 |
|
|
$ |
2,183 |
|
Commercial
mortgages
|
|
|
3 |
|
|
|
772 |
|
|
|
8 |
|
|
|
2,544 |
|
|
|
11 |
|
|
|
3,316 |
|
Construction
|
|
|
1 |
|
|
|
140 |
|
|
|
3 |
|
|
|
444 |
|
|
|
4 |
|
|
|
584 |
|
Home
equity
|
|
|
2 |
|
|
|
126 |
|
|
|
- |
|
|
|
- |
|
|
|
2 |
|
|
|
126 |
|
Commercial
and industrial
|
|
|
5 |
|
|
|
242 |
|
|
|
15 |
|
|
|
425 |
|
|
|
20 |
|
|
|
667 |
|
Automobile
|
|
|
1 |
|
|
|
8 |
|
|
|
- |
|
|
|
- |
|
|
|
1 |
|
|
|
8 |
|
Other
consumer
|
|
|
1 |
|
|
|
2 |
|
|
|
2 |
|
|
|
140 |
|
|
|
3 |
|
|
|
142 |
|
Total
|
|
|
20 |
|
|
$ |
2,229 |
|
|
|
35 |
|
|
$ |
4,797 |
|
|
|
55 |
|
|
$ |
7,026 |
|
Classified
Assets. The following table shows the aggregate amount of our
classified assets at the date indicated for both loans and foreclosed assets.
The total amount of loans in the table below at March 31, 2009 includes twelve
relationships which represent 65% of the classified asset total.
|
|
At
March 31,
|
|
|
At
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In
thousands)
|
|
Residential Real Estate
(1):
|
|
|
|
|
|
|
Special
mention
|
|
$ |
374 |
|
|
$ |
379 |
|
Substandard
|
|
|
1,632
|
(2) |
|
|
1,552 |
|
All Other Loans (3):
|
|
|
|
|
|
|
|
|
Special
mention
|
|
|
24,826 |
|
|
|
17,984 |
|
Substandard
|
|
|
23,914 |
|
|
|
22,975 |
|
Doubtful
|
|
|
293 |
|
|
|
894 |
|
Loss
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Foreclosed
Assets:
|
|
|
|
|
|
|
|
|
Other
real estate owned
|
|
|
739 |
|
|
|
998 |
|
|
|
|
|
|
|
|
|
|
Total
classified assets
|
|
$ |
51,778 |
|
|
$ |
44,782 |
|
|
|
|
|
|
|
|
|
|
(1) Includes
one-to-four family loans and home equity loans and lines of
credit.
|
|
|
|
|
|
(2) Includes
ten residential relationships, four of which are in foreclosure or
liquidation proceedings.
|
|
(3) Includes
$11.2 million of construction loans for one- to-four family or condominium
construction.
|
|
|
|
|
|
|
|
|
|
|
Comparison
of Operating Results for the Three Months Ended March 31, 2009 and
2008
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, FDIC insurance assessment, 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 $2.1 million, or $0.14
per diluted share, for the first quarter of 2009 compared to net income of $2.0
million, or $0.12 per diluted share, for the same period in 2008. The
Company’s improved results were largely due to a significant increase in net
interest income, driven by growth in average earning assets, and an expansion in
non-interest income, mainly attributable to net gains realized from loan sales
and an increase in income from bank-owned life insurance. The
quarterly operating performance was also affected by higher provisions 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 March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
|
Average
|
|
|
and
|
|
|
Yield/
|
|
|
Average
|
|
|
and
|
|
|
Yield/
|
|
|
|
Balance
|
|
|
Dividends
|
|
|
Cost
|
|
|
Balance
|
|
|
Dividends
|
|
|
Cost
|
|
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
real estate
|
|
$ |
355,060 |
|
|
$ |
4,943 |
|
|
|
5.57 |
% |
|
$ |
348,753 |
|
|
$ |
4,921 |
|
|
|
5.64 |
% |
Commercial
real estate
|
|
|
282,593 |
|
|
|
4,187 |
|
|
|
5.93 |
% |
|
|
248,963 |
|
|
|
4,021 |
|
|
|
6.46 |
% |
Home
equity
|
|
|
121,371 |
|
|
|
1,418 |
|
|
|
4.67 |
% |
|
|
117,254 |
|
|
|
1,794 |
|
|
|
6.12 |
% |
Commercial
and industrial
|
|
|
82,804 |
|
|
|
1,113 |
|
|
|
5.38 |
% |
|
|
82,382 |
|
|
|
1,389 |
|
|
|
6.74 |
% |
Consumer
and other
|
|
|
27,752 |
|
|
|
390 |
|
|
|
5.62 |
% |
|
|
30,950 |
|
|
|
422 |
|
|
|
5.45 |
% |
Total
loans
|
|
|
869,580 |
|
|
|
12,051 |
|
|
|
5.54 |
% |
|
|
828,302 |
|
|
|
12,547 |
|
|
|
6.06 |
% |
Investment
securities
|
|
|
313,799 |
|
|
|
3,871 |
|
|
|
4.93 |
% |
|
|
211,880 |
|
|
|
2,618 |
|
|
|
4.94 |
% |
Other
interest-earning assets
|
|
|
14,661 |
|
|
|
8 |
|
|
|
0.22 |
% |
|
|
21,796 |
|
|
|
241 |
|
|
|
4.42 |
% |
Total
interest-earning assets
|
|
|
1,198,040 |
|
|
|
15,930 |
|
|
|
5.32 |
% |
|
|
1,061,978 |
|
|
|
15,406 |
|
|
|
5.80 |
% |
Noninterest-earning
assets(4)
|
|
|
53,185 |
|
|
|
|
|
|
|
|
|
|
|
33,888 |
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
1,251,225 |
|
|
|
|
|
|
|
|
|
|
$ |
1,095,866 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
accounts
|
|
$ |
105,664 |
|
|
|
288 |
|
|
|
1.09 |
% |
|
$ |
67,550 |
|
|
|
166 |
|
|
|
0.98 |
% |
Money
market accounts
|
|
|
171,175 |
|
|
|
626 |
|
|
|
1.46 |
% |
|
|
174,802 |
|
|
|
1,009 |
|
|
|
2.31 |
% |
NOW
accounts
|
|
|
30,344 |
|
|
|
35 |
|
|
|
0.46 |
% |
|
|
31,926 |
|
|
|
41 |
|
|
|
0.51 |
% |
Certificates
of deposit
|
|
|
367,031 |
|
|
|
2,876 |
|
|
|
3.13 |
% |
|
|
354,031 |
|
|
|
3,757 |
|
|
|
4.24 |
% |
Total
interest-bearing deposits
|
|
|
674,214 |
|
|
|
3,825 |
|
|
|
2.27 |
% |
|
|
628,309 |
|
|
|
4,973 |
|
|
|
3.17 |
% |
FHLB
advances
|
|
|
204,501 |
|
|
|
1,737 |
|
|
|
3.40 |
% |
|
|
116,519 |
|
|
|
1,301 |
|
|
|
4.47 |
% |
Other
interest-bearing liabilities
|
|
|
31,780 |
|
|
|
213 |
|
|
|
2.68 |
% |
|
|
11,592 |
|
|
|
101 |
|
|
|
3.49 |
% |
Total
interest-bearing liabilities
|
|
|
910,495 |
|
|
|
5,775 |
|
|
|
2.54 |
% |
|
|
756,420 |
|
|
|
6,375 |
|
|
|
3.37 |
% |
Demand
deposits
|
|
|
111,099 |
|
|
|
|
|
|
|
|
|
|
|
101,785 |
|
|
|
|
|
|
|
|
|
Other
noninterest-bearing liabilities
|
|
|
8,948 |
|
|
|
|
|
|
|
|
|
|
|
10,248 |
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
1,030,542 |
|
|
|
|
|
|
|
|
|
|
|
868,453 |
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
220,683 |
|
|
|
|
|
|
|
|
|
|
|
227,413 |
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' equity
|
|
$ |
1,251,225 |
|
|
|
|
|
|
|
|
|
|
$ |
1,095,866 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
|
|
|
|
$ |
10,155 |
|
|
|
|
|
|
|
|
|
|
$ |
9,031 |
|
|
|
|
|
Interest
rate spread(1)
|
|
|
|
|
|
|
|
|
|
|
2.78 |
% |
|
|
|
|
|
|
|
|
|
|
2.43 |
% |
Net
interest-earning assets(2)
|
|
$ |
287,545 |
|
|
|
|
|
|
|
|
|
|
$ |
305,558 |
|
|
|
|
|
|
|
|
|
Net
interest margin(3)
|
|
|
|
|
|
|
|
|
|
|
3.39 |
% |
|
|
|
|
|
|
|
|
|
|
3.40 |
% |
Average
interest-earning assets to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
average
interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
131.58 |
% |
|
|
|
|
|
|
|
|
|
|
140.40 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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.
|
|
(4)
|
Includes
bank-owned life insurance, the income on which is classified as
non-interest income.
|
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 March 31,
|
|
|
|
2009
vs. 2008
|
|
|
|
Increase
(Decrease) Due to
|
|
|
|
Volume
|
|
|
Rate
|
|
|
Net
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning
assets:
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
Residential
real estate
|
|
$ |
88 |
|
|
$ |
(66 |
) |
|
$ |
22 |
|
Commercial
real estate
|
|
|
515 |
|
|
|
(349 |
) |
|
|
166 |
|
Home
equity
|
|
|
61 |
|
|
|
(437 |
) |
|
|
(376 |
) |
Commercial
and industrial
|
|
|
7 |
|
|
|
(283 |
) |
|
|
(276 |
) |
Consumer
and other
|
|
|
(45 |
) |
|
|
13 |
|
|
|
(32 |
) |
Total
loans
|
|
|
626 |
|
|
|
(1,122 |
) |
|
|
(496 |
) |
Investment
securities
|
|
|
1,257 |
|
|
|
(4 |
) |
|
|
1,253 |
|
Other
interest-earning assets
|
|
|
(60 |
) |
|
|
(173 |
) |
|
|
(233 |
) |
Total
interest-earning assets
|
|
|
1,823 |
|
|
|
(1,299 |
) |
|
|
524 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
accounts
|
|
|
102 |
|
|
|
20 |
|
|
|
122 |
|
Money
market accounts
|
|
|
(21 |
) |
|
|
(362 |
) |
|
|
(383 |
) |
NOW
accounts
|
|
|
(2 |
) |
|
|
(4 |
) |
|
|
(6 |
) |
Certificates
of deposit
|
|
|
134 |
|
|
|
(1,015 |
) |
|
|
(881 |
) |
Total
interest-bearing deposits
|
|
|
213 |
|
|
|
(1,361 |
) |
|
|
(1,148 |
) |
FHLB
advances
|
|
|
804 |
|
|
|
(368 |
) |
|
|
436 |
|
Other
interest-bearing liabilities
|
|
|
140 |
|
|
|
(28 |
) |
|
|
112 |
|
Total
interest-bearing liabilities
|
|
|
1,157 |
|
|
|
(1,757 |
) |
|
|
(600 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in net interest income
|
|
$ |
666 |
|
|
$ |
458 |
|
|
$ |
1,124 |
|
Net Interest
Income Before Provision for Loan Losses. Net interest income
before provision for loan losses increased $1.1 million, or 12.4%, to $10.2
million for the three months ended March 31, 2009 from the same period in 2008
as a result of growth in average earning assets. Average earning assets expanded
$136.1 million, or 12.8%, to $1.2 billion, mainly due to loan growth and
purchases of mortgage-backed securities. Net interest margin decreased 1
basis point to 3.39% for the three-month period ended March 31, 2009 compared to
3.40% for the same period in 2008.
Interest
Income. Interest income increased $524,000, or 3.4%, to $15.9
million for the three months ended March 31, 2009 from $15.4 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 $136.1 million,
or 12.8%, to $1.2 billion for the three months ended March 31, 2009 mainly due
to purchases of mortgage-backed securities and loan growth. Total average
investment securities increased by $101.9 million, or 48.1%, to $313.8 million
due to the purchases of mortgage-backed securities, partially offset by
maturities, calls, sales and principal repayments of existing
securities. Total average loans increased $41.3 million, or 5.0%, to
$869.6 million for the first quarter of 2009 as a result of origination
activity, partially offset by scheduled amortization, prepayments of existing
loans and residential real estate loan sales during the first quarter of 2009.
The yield on average interest-earning assets decreased by 48 basis points to
5.32% for the first quarter of 2009 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 primarily limited to home equity, commercial loans and commercial real
estate loans due to the significant number of loans tied to the prime rate or a
shorter-term index. The lower yield on earning assets was also due to the
suspension of the Federal Home Loan Bank of Boston stock dividend for the first
quarter of 2009 and most likely the remainder of the year. In the comparible
2008 period, we received $153,000 in stock dividends from the Federal Home Loan
Bank of Boston
Interest
Expense. Interest expense decreased $600,000, or 9.41%, to
$5.8 million for the three months ended March 31, 2009 from $6.4 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 83 basis points to 2.54% for the three months ended March
31, 2009 reflecting the repricing of money market and certificate of deposit
balances in response to interest rate cuts initiated by the Federal Reserve
Board. The Company also benefitted from the impact of lower market interest
rates on the cost of FHLB advances and other interest-bearing
liabilities. Average interest-bearing liabilities increased $154.1
million, or 20.4%, to $910.5 million for the three months ended March 31, 2009
from $756.4 million for the prior year period reflecting growth in
interest-bearing deposits, FHLB advances and other interest-bearing liabilities.
Total average interest-bearing deposits increased $45.9 million, or 7.3%, to
$674.2 million for the first quarter of 2009 as compared to $628.3 million for
the three months ended March 31, 2008, mainly attributable to an increase in
savings account and certificate of deposit balances. Total average FHLB advances
increased $88.0 million, or 75.5%, to $204.5 million to fund asset growth and to
take advantage of the lower interest rates. Total other interest-bearing
liabilities increased $20.2 million, or 174.2%, to $31.8 million reflecting the
use of longer-term repurchase agreements to support balance sheet expansion and
lengthen the duration of borrowings at attractive rates.
Provision for
Loan Losses. The provision for loan losses increased $356,000 to $540,000
for the three months ended March 31, 2009 as compared to $184,000 for the same
period in 2008 mainly resulting from an increase in reserves for non-performing
and classified loans. 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 $8.7 million, or 1.01%, of loans
outstanding at March 31, 2009.
Non-interest
Income. Non-interest income increased $332,000, or 21.9%, to
$1.9 million for the three months ended March 31, 2009 from $1.5 million
for the comparable period in 2008 due to an increase of $264,000 in income from
bank-owned life insurance reflecting the purchase of an additional $20 million
of cash surrender value life insurance in November of 2008 and net gains of
$125,000 realized from loan sales.
Non-interest
Expense. Non-interest expense increased $979,000, or 13.6%, to
$8.2 million for the three months ended March 31, 2009 from $7.2 million
for the prior year period. Total salaries and benefits increased $623,000, or
15.4%, mainly due to staffing costs for 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, an
increase in stock-based compensation as a result of stock options and restricted
stock granted in the second quarter of 2008 and annual wage increases. Occupancy
costs expanded $156,000, or 30.6%, mainly due to new branches opened in 2008.
Data processing expenses increased $125,000, or 17.4%, 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. The Federal Deposit Insurance Corporation insurance
assessment increased $319,000 in connection with a higher quarterly insurance
premium. Since June 2007, the Company’s insurance premiums have been
substantially reduced by a special one-time credit, which was exhausted in June
2008. The
Federal Deposit Insurance Corporation issued an interim final rule that would
impose a special assessment on all insured deposits as of June 30, 2009, which
would be collected on September 30, 2009. Other expenses decreased
$208,000 of which $168,000 was due to interest accrued in the first quarter of
2008 related to proposed IRS adjustments associated with an examination of the
Company’s 2005 and 2006 tax returns.
Income Tax
Expense. Income tax expense
decreased $36,000 to $1.2 million for three months ended March 31, 2009 from the
comparable 2008 period as a result of a decrease in the effective tax rate
partially offset by higher pretax income. The effective tax rate declined to
35.9% in the first quarter of 2009 compared to 38.4% for the same period in 2008
primarily attributable to an increase of $264,000 in non-taxable income from
bank-owned life insurance.
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
of +200 basis points at March 31, 2009 and December 31, 2008. Due
to the historically low level of interest rates, a model reflecting a downward
shift in the yield curve is not relevant and was not produced at the dates
indicated.
Net
Interest Income At-Risk
|
|
|
|
|
|
|
|
Estimated
Increase (Decrease)
|
|
Estimated
Increase (Decrease)
|
Change
in Interest Rates
|
|
in
NII
|
|
in
NII
|
(Basis
Points)
|
|
(March
31, 2009)
|
|
(December
31, 2008)
|
|
|
|
|
|
-100
|
|
NA
|
|
NA
|
Stable
|
|
0.0%
|
|
0.0%
|
+200
|
|
0.8%
|
|
(3.3)%
|
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 any interest rate
decreases. 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.
|
|
|
March
31, 2009
|
|
|
|
|
|
|
|
|
|
NPV
as a Percentage of Present
|
|
|
|
|
|
|
|
|
|
Value
of Assets (3)
|
|
|
|
|
|
Estimated
Increase (Decrease) in
|
|
|
|
|
|
Change
in
|
|
|
|
NPV
|
|
|
|
Increase
|
|
Interest
Rates
|
|
Estimated
|
|
|
|
|
|
|
|
(Decrease)
|
|
(basis
points) (1)
|
|
NPV (2)
|
|
Amount
|
|
Percent
|
|
NPV
Ratio (4)
|
|
(basis
points)
|
|
|
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
+300
|
|
$ 130,665
|
|
$ (51,254)
|
|
(28)%
|
|
11.24%
|
|
(316)
|
+200
|
|
155,006
|
|
(26,914)
|
|
(15)
|
|
12.90
|
|
(150)
|
+100
|
|
172,318
|
|
(9,602)
|
|
(5)
|
|
13.95
|
|
(45)
|
0
|
|
181,920
|
|
|
|
|
|
14.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2008
|
|
|
|
|
|
|
|
|
|
|
NPV
as a Percentage of Present
|
|
|
|
|
|
|
|
|
|
|
Value
of Assets (3)
|
|
|
|
|
|
|
Estimated
Increase (Decrease) in
|
|
|
|
|
|
Change
in
|
|
|
|
NPV
|
|
|
|
Increase
|
|
Interest
Rates
|
|
Estimated
|
|
|
|
|
|
|
|
(Decrease)
|
|
(basis
points) (1)
|
|
NPV (2)
|
|
Amount
|
|
Percent
|
|
NPV
Ratio (4)
|
|
(basis
points)
|
|
|
|
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
+300
|
|
$ 122,901
|
|
$ (66,712)
|
|
(35)%
|
|
10.52%
|
|
(424)
|
|
+200
|
|
147,220
|
|
(42,393)
|
|
(22)
|
|
12.19
|
|
(257)
|
|
+100
|
|
170,707
|
|
(18,906)
|
|
(10)
|
|
13.68
|
|
(108)
|
|
0
|
|
189,613
|
|
|
|
|
|
14.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 March 31, 2009 and December 31, 2008, in the event
of a 300 basis point increase in interest rates, we would experience a 28% and
35%, respectively, decrease in net portfolio value. We did not prepare a net
portfolio value calculation for interest rate decreases at the dates indicated
due to the historically low interest rate environment.
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 March 31, 2009 our liquidity ratio was 34.40%, compared to
35.02% at December 31, 2008.
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 March
31, 2009, cash and cash equivalents totaled $11.9 million. Securities classified
as available-for-sale, which provide additional sources of liquidity, totaled
$303.7 million at March 31, 2009. In addition, at March 31, 2009, we had the
ability to borrow a total of approximately $463.8 million from the Federal Home
Loan Bank of Boston. On that date, we had $186.8 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 March
31, 2009, we had $14.4 million in loan commitments outstanding. In addition to
commitments to originate loans, we had $159.0 million in unused lines of credit
to borrowers and $23.2 million to be disbursed under existing construction loan
commitments. Certificates of deposit due within one year of March 31, 2009
totaled $249.5 million, or 31.4% 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 March 31, 2010. 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 three months ended March 31, 2009, we originated
$60.0 million of loans and purchased $6.6 million of securities. In the
comparable 2008 period, we originated $59.9 million of loans and purchased
$124.4 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 $12.7
million and $36.8 million for the three months ended March 31, 2009 and 2008,
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 decreased by $21.7 million
during the three months ended March 31, 2009 reflecting the use of cash flows
received from the loan and investment portfolios to pay down short term Federal
Home Loan Bank advances. For the same period in 2008, Federal Home Loan Bank
advances increased $33.4 million. 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 $264.0 at March 31, 2009 and $282.1 at
December 31, 2008. At March 31, 2009 and December 31, 2008, the Bank had no
borrowing against the line of credit. We also have access to funding through the
repurchase agreement and brokered CD markets and have received approval from the
Federal Reserve Bank to access its discount window. The Bank and the Company
also applied for and received approval from the FDIC to issue guaranteed debt
through the Temporary Liquidity Guarantee Program (“TLGP”). The FDIC has created
this program to strengthen confidence and encourage liquidity in the banking
system by guaranteeing newly issued senior unsecured debt of banks, thrifts, and
certain holding companies, and by providing full FDIC insurance coverage of
non-interest bearing deposit transaction accounts, regardless of dollar
amount.
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 March 31,
2009. 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
|
|
$ |
249,514 |
|
|
$ |
85,702 |
|
|
$ |
25,616 |
|
|
$ |
- |
|
|
$ |
360,832 |
|
Federal
Home Loan Bank advances
|
|
|
36,000 |
|
|
|
73,214 |
|
|
|
49,084 |
|
|
|
28,549 |
|
|
|
186,847 |
|
Repurchase
agreements
|
|
|
10,464 |
|
|
|
- |
|
|
|
- |
|
|
|
20,000 |
|
|
|
30,464 |
|
Standby
letters of credit
|
|
|
1,082 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,082 |
|
Operating
leases
|
|
|
596 |
|
|
|
936 |
|
|
|
711 |
|
|
|
2,834 |
|
|
|
5,077 |
|
Capitalized
leases
|
|
|
252 |
|
|
|
504 |
|
|
|
503 |
|
|
|
3,948 |
|
|
|
5,207 |
|
Future
benefits to be paid under
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
retirement
plans
|
|
|
198 |
|
|
|
3,064 |
|
|
|
1,037 |
|
|
|
760 |
|
|
|
5,059 |
|
Total
|
|
$ |
298,106 |
|
|
$ |
163,420 |
|
|
$ |
76,951 |
|
|
$ |
56,091 |
|
|
$ |
594,568 |
|
Commitments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
to extend credit
|
|
$ |
197,680 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
197,680 |
|
Commitment
to invest in venture
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
capital
fund
|
|
|
850 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
850 |
|
Total
|
|
$ |
198,530 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
198,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 March 31, 2009, the Bank exceeded all regulatory capital
requirements. United Bank is considered “well capitalized” under regulatory
requirements.
|
|
|
|
|
|
To
Be Well Capitalized
|
|
|
|
|
|
For
Capital
|
|
Under
Regulatory
|
|
|
|
Actual
|
|
Adequacy
Purposes
|
|
Framework
|
|
As
of March 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
risk-based capital
|
|
19.72%
|
|
8.00%
|
|
10.00%
|
|
|
|
|
|
|
|
|
|
Tier
1 risk-based capital
|
|
18.68%
|
|
4.00%
|
|
6.00%
|
|
|
|
|
|
|
|
|
|
Tier
1 (core) capital
|
|
12.80%
|
|
4.00%
|
|
5.00%
|
|
|
|
|
|
|
|
|
|
Tangible
equity
|
|
12.80%
|
|
1.50%
|
|
N/A
|
|
|
|
|
|
|
|
|
|
As
of December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
risk-based capital
|
|
18.71%
|
|
8.00%
|
|
10.00%
|
|
|
|
|
|
|
|
|
|
Tier
1 risk-based capital
|
|
17.76%
|
|
4.00%
|
|
6.00%
|
|
|
|
|
|
|
|
|
|
Tier
1 (core) capital
|
|
12.31%
|
|
4.00%
|
|
5.00%
|
|
|
|
|
|
|
|
|
|
Tangible
equity
|
|
12.31%
|
|
1.50%
|
|
N/A
|
|
|
|
|
|
|
|
|
|
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 March
31, 2009, the Company was not involved in any legal proceedings, the outcome of
which would be material to the Company’s Consolidated Financial
Statements.
As of
March 31, 2009, 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,
2008.
ITEM
2. Unregistered Sales of Equity Securities and
Use of Proceeds
(a)
No unregistered securities were sold by the Company during the quarter ended
March 31, 2009.
(b)
Not applicable
(c)
The following table provides certain information with regard to shares
repurchased by the Company in the first quarter of 2009.
|
|
|
|
|
|
|
|
(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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
1 - 31, 2009
|
|
|
679,100 |
|
|
$ |
14.05 |
|
|
|
679,100 |
|
|
|
79 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February
1 - 28, 2009
|
|
|
22,779 |
|
|
|
12.91 |
|
|
|
22,779 |
|
|
|
818,438 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
1 - 31, 2009
|
|
|
298,700 |
|
|
|
12.69 |
|
|
|
298,700 |
|
|
|
519,738 |
|
Total
|
|
|
1,000,579 |
|
|
$ |
13.62 |
|
|
|
1,000,579 |
|
|
|
|
|
ITEM
3. Defaults Upon Senior Securities
Not
applicable.
ITEM
4. Submission of Matters to a Vote of Security
Holders
Not
applicable.
ITEM
5. Other Information
Not
applicable.
3.1
|
Articles
of Incorporation of United Financial Bancorp, Inc. (1)
|
3.2
|
Amended
and Restated 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 2009 Annual Incentive Plan
|
10.12
|
United
Bank 2007 Director Retirement Plan (7)
|
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 (8)
|
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 10-K of United Financial Bancorp, Inc. filed with
the Securities and Exchange Commission on March 13,
2009.
|
(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 8-K of United Financial Bancorp, Inc. filed with
the Securities and Exchange Commission on November 21,
2007.
|
(8)
|
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:
May
8, 2009
|
By:
|
/s/ Richard B. Collins
|
|
|
Richard
B. Collins
|
|
|
Chairman,
President and Chief Executive Officer
|
|
|
|
|
|
|
Date:
May
8, 2009
|
By:
|
/s/ Mark A. Roberts
|
|
|
Mark
A. Roberts
|
|
|
Executive
Vice President and Chief Financial
Officer
|
31