The merger last year between Rockville Financial and United Financial took a bite out of the combined entity’s earnings in 2014, but United Financial executives expressed confidence in the bank’s potential for organic growth during a conference call today with investors.
United Financial Bancorp’s net income totaled $1.4 million for the fourth quarter of 2014 and $6.8 million for the year, compared with $1.8 million and $14.2 million that Rockville posted in those corresponding periods in 2013.
The company’s fourth quarter results included about $10.1 million worth of merger and acquisition-related expenses, including payments to former employees whose positions were eliminated and consulting fees associated with data processing conversion.
But CEO William H. W. Crawford was also confident about his bank’s ability to grow organically – and to steal market share – throughout its new, larger footprint.
In response to an investor’s question about United’s appetite for another acquisition, Crawford said, "Most importantly, we want to deliver on the numbers we talked about at this merger. That’s our focus right now, is generating strong organic growth and improving these numbers."
In the fourth quarter, interest income totaled $48.2 million, representing an increase of $1 million, or 2 percent, from the linked quarter due to organic earning asset growth across loan portfolios and the investment portfolio. Earning assets increased by $165 million, or 3 percent, organically during the quarter, while average interest-earning assets increased by $151 million, or 3 percent, from the linked quarter.
Interest expenses also increased, rising by $1.3 million or 26 percent to $6.3 million in the fourth quarter. That was largely driven by $75 million of subordinated debt issued in late September. Average interest bearing liabilities increased by $175 million, or 5 percent, from the linked quarter.
Total non-interest income declined $1.1, million, or 26 percent, to $3 million in the fourth quarter from the prior three-month period. This line item was impacted by a $1.4 million decline in other income compared with the linked quarter resulting from the company’s consolidation of five branches.
Non-interest expense for the fourth quarter increased $10.2 million, or 29 percent, to $45.1 million from the prior quarter. That increase included $6.1 million in expenses directly related to the merger; $2.4 million in increased occupancy expenses, of which $1.9 million was attributed to the closure of underutilized branches; and $1.1 million in marketing and promotion expenses.
Those expense increases were partially offset by a $1 million decrease in salaries and employee benefits expense and a $712,000 decrease in service bureau fees.
Total commercial loans grew organically during the fourth quarter of 2014 by $65 million, or 11 percent annualized. For the quarter ended Dec. 31, commercial loan growth was comprised of a commercial real estate portfolio increase of $19 million, or 1 percent, and an increase in the commercial construction portfolio of $51 million, or 42 percent, partially offset by a decrease in the commercial business portfolio of $5 million, or 1 percent.
During the conference call, company executives touted the bank’s new commercial lending teams in the Worcester and Springfield markets and expressed confidence in future organic growth in those areas.
United also reported record quarterly origination volume for residential mortgage loans in the fourth quarter. During that period, mortgage originations increased by $62 million to $122 million from $60 million in the year-ago period. On a linked quarter basis, residential mortgage originations increased by $6 million from $116 million in the third quarter of 2014. Purchase mortgage activity increased during this time period to $74 million, or 61 percent, of production in the fourth quarter, compared with $37 million, or 62 percent, in the corresponding period in 2013. On-balance sheet, residential mortgage loans grew by $52 million compared with the linked quarter.
