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The parent company of Hartford-based United Bank, which has a significant presence in Western Massachusetts, will focus on keeping expenses in check and growing its commercial real estate portfolio in 2019.
That was the overarching message from United Bank executives on a recent earnings call after the bank reported earnings of $12.2 million, or $0.24 per diluted share, for the fourth quarter of 2018, up from net income of $9.5 million, or $0.19 per diluted share, in the fourth quarter of 2017.
Net interest income for the quarter was $48.3 million, up about $1.5 million from the fourth quarter of 2017. The margin dropped eight basis points from last year, settling at 2.9 percent, and non-interest expenses for the year were $43.7 million, up more than $6 million from the fourth quarter of 2017.
“As we look forward, our primary objective will be to curtail non-interest expense growth and fully capitalize upon the company’s past investments in order to drive improved operating leverage,” United Bank CEO and President Bill Crawford said on the call. “Given a near flat yield curve, limiting future expense growth and further infrastructure investments will be critical to drive an earnings growth.”
The bank’s expenses were high this quarter due to moves intended to reduce long term costs. The bank laid off some of its home loan officers as part of a broader shakeup of its mortgage operations; specifically, it eliminated the retail loan officer position and the back office staff that supported the acquisition channel.
The move resulted in $2.2 million in severance expenses and was made to make its mortgage team more digital, according to executives.
“Increasingly our customers apply online or call into our mortgage loan sales team,” United’s CFO Eric Newell said on the call. “These direct acquisition channels have a distinct and meaningful cost benefit for the company versus the traditional retail channel.”
Executives acknowledged that they expect to see less production out of its mortgage channels.
Newell said he expects mortgage banking revenue to fall by about 30 percent from 2018 and that it will also contribute less to total fee income.
During the year, the bank grew total assets by a little more than $240 million from the end of 2017, reaching $7.35 billion in assets. Total deposits grew more than $470 million yer-over-year, as the bank ran some promotions during the quarter, while total loans grew more than $315 million year-over-year.
Residential real estate and other consumer loans actually had the biggest jump out of all loan categories, but executives expect the situation to flip in 2019.
The bank also completed its acquisition of three branches from Webster Bank during the quarter and closed three of its other branches as well.
The provision for loan losses totaled $2.6 million for the quarter, up from $2.2 million in the fourth quarter of 2017. Total non-performing assets were about $32.06 million, down year-over-year and equivalent to .44 percent of total assets.
