United Financial Bancorp 8-K Deposits; Declares Dividend of $0.06 Per Share

FOR IMMEDIATE RELEASE	For More Information Contact:
	Mark A. Roberts
	Executive Vice President & CFO
	(413) 787-1700

UNITED FINANCIAL BANCORP REPORTS SOLID GROWTH IN LOANS AND CORE

DEPOSITS; DECLARES DIVIDEND OF $0.06 PER SHARE

WEST SPRINGFIELD, MA—April 20, 2007—United Financial Bancorp, Inc. (the “Company”) (NASDAQ:UBNK), the holding company for United Bank (the “Bank”), reported net income of $834,000, or $0.05 per diluted share, for the first quarter of 2007 compared to net income of $1.4 million, or $0.08 per diluted share, for the same period in 2006.  The Company’s lower net income and earnings per share were due in large part to net interest margin contraction, a higher provision for loan losses, and increased non-interest expenses.  The 2007 results were favorably affected by growth in average earning assets and expansion in non-interest income.  The Company also announced a quarterly cash dividend of $0.06 per share payable on May 29, 2007 to shareholders of record as of May 15, 2007.  After giving effect to the waiver of receipt of dividends paid on shares owned by United Mutual Holding Company, the Company’s mutual holding company, the dividend payout ratio will be approximately 57% of the first quarter 2007 earnings.

The Company’s total assets increased $24.2 million, or 2.4%, during the quarter to $1.0 billion at March 31, 2007 reflecting loan growth of $23.9 million and an increase of $16.6 million in cash and cash equivalents, partially offset by an $18.8 million reduction in securities available for sale.  Balance sheet expansion was funded by an increase of $31.3 million, or 4.6%, in total deposits.  Cash flows from the securities portfolio and a portion of the increase in deposit balances were used to repay higher cost short-term advances from the Federal Home Loan Bank and to invest excess cash in overnight interest-earning accounts in anticipation of loan funding requirements.

"We are pleased with the results of our efforts to expand our franchise,” commented Richard B. Collins, President and Chief Executive Officer.  “We believe that consistent growth in our loan, deposit and wealth management customer base will ultimately result in improved profitability.  However, our current operating results reflect the challenges of an unfavorable yield curve and a very competitive local market.”  Mr. Collins also remarked that “we also continue to implement capital management and asset liability management strategies which we believe will enhance our performance.”

Financial Highlights Include:

· Gross loans increased $23.9 million, or 3.1%, to $786.0 million at March 31, 2007 compared to $762.1 million at December 31, 2006.  Loan growth was concentrated in the residential (2.1%), commercial real estate (12.5%) and home equity (3.2%) portfolios.  Origination activity was solid in the first quarter of 2007 reflecting a sound local economy, a resilient real estate market, a relatively low interest rate environment, competitive products and pricing, and successful business development efforts.

· The ratio of non-performing loans to total loans was 0.17% at March 31, 2007 and December 31, 2006.

· At March 31, 2007, the allowance for loan losses to total loans was 0.94% and the allowance for loan losses to non-performing loans was 570%.

· Total deposits increased $31.3 million, or 4.6%, to $716.9 million at March 31, 2007 compared to $685.7 million at December 31, 2006.  Deposit growth was solid in all categories, with increases of 4.5% in transaction accounts, 3.8% in savings balances, 6.7% in money market accounts and 3.6% in certificates of deposit.  The first quarter results were affected by the December 2006 opening of our second branch in Westfield, Massachusetts, the introduction of new products and services, competitive pricing and targeted promotional activities.

· Net interest income was essentially flat, increasing $48,000 to $7.0 million for the three months ended March 31, 2007 from $6.9 million for the same period last year.  Average earning assets expanded $94.9 million, or 10.7%, mainly due to strong loan growth, offset in part by the use of cash flows from the investment portfolio to fund balance sheet expansion.  The impact of growth in average earning assets was offset by net interest margin compression.  Net interest margin contracted 28 basis points to 2.82% for the first quarter of 2007 mainly due to the flat to inverted yield curve, increasingly competitive pricing conditions for loans and deposits, a shift in deposit demand towards higher-yielding money market and time deposit accounts and the impact of increased short-term market interest rates on the cost to fund earning assets.

· Non-interest income expanded $140,000, or 11.1%, to $1.4 million for the first quarter of 2007 from $1.3 million for the same period last year reflecting strong growth in fee income from deposits and wealth management accounts.

· Non-interest expenses increased $871,000, or 15.1%, to $6.6 million for the three months ended March 31, 2007 as a result of an increase in stock-based compensation ($693,000), staff and occupancy costs related to new branches opened in the second and fourth quarters of 2006 ($189,000) and audit and accounting fees ($120,000).  The expansion in stock-based compensation was mainly due to restricted stock and stock options awarded in the third and fourth quarters of 2006.  These increases were somewhat offset by a reduction of $93,000 in marketing costs.

United Financial Bancorp, Inc. is a publicly owned corporation and the holding company for United Bank, a federally chartered bank headquartered at 95 Elm Street, West Springfield, MA 01090.  The Company’s common stock is traded on the NASDAQ Global Select Market under the symbol UBNK.  United Bank provides an array of financial products and services through its 13 branch offices located throughout Western Massachusetts.  Through its Wealth Management Group and its partnership with NFP Securities, Inc., the Bank is able to offer access to a wide range of investment and insurance products and services, as well as financial, estate and retirement strategies and products.  For more information regarding the Bank’s products and services and for United Financial Bancorp, Inc. investor relations information, please visit www.bankatunited.com.

Except for the historical information contained in this press release, the matters discussed may be deemed to be forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties, including changes in economic conditions in the Company’s market area, changes in policies by regulatory agencies, fluctuations in interest rates, demand for loans in the Company’s market area, competition, and other risks detailed from time to time in the Company’s SEC reports.  Actual strategies and results in future periods may differ materially from those currently expected.   These forward-looking statements represent the Company’s judgment as of the date of this release.  The Company disclaims, however, any intent or obligation to update these forward-looking statements.

UNITED FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION (unaudited)
(Dollars in thousands, except par value amounts)
	March 31,			December 31,			March 31,
Assets	2007			2006			2006
Cash and cash equivalents	$	42,044		$	25,419		$	52,800
Securities available for sale, at fair value		171,474			190,237			220,485
Securities held to maturity, at amortized cost		3,913			3,241			3,323
Federal Home Loan Bank of Boston stock, at cost		9,885			9,274			6,684
Loans:
Residential mortgages		325,948			319,108			283,420
Commercial mortgages		197,514			175,564			154,637
Construction loans		48,748			54,759			30,167
Commercial loans		67,723			69,762			58,734
Home equity loans		116,350			112,739			91,552
Consumer loans		29,681			30,181			27,863
Total loans		785,964			762,113			646,373
Net deferred loan costs and fees		1,367			1,285			1,215
Allowance for loan losses		(7,426	)		(7,218	)		(6,580	)
Loans, net		779,905			756,180			641,008
Other real estate owned		-			562			-
Premises and equipment, net		10,673			8,821			8,141
Bank-owned life insurance		6,473			6,304			6,113
Other assets		9,331			9,395			9,015
Total assets	$	1,033,698		$	1,009,433		$	947,569
Liabilities and Stockholders' Equity
Deposits:
Demand	$	102,513		$	97,190		$	92,762
NOW		38,227			37,523			38,714
Savings		68,006			65,475			84,646
Money market		177,173			165,984			158,367
Certificates of deposit		331,020			319,514			311,292
Total deposits		716,939			685,686			685,781
Federal Home Loan Bank of Boston advances		162,171			169,806			112,542
Repurchase agreements		8,825			10,425			6,388
Escrow funds held for borrowers		1,537			1,121			1,259
Accrued expenses and other liabilities		5,741			4,684			4,307
Total liabilities		895,213			871,722			810,277
Stockholders' Equity:
Preferred stock ($0.01 par value; 5,000,000 shares
authorized; no shares issued and outstanding)		-			-			-
Common stock ($0.01 par value; 60,000,000 shares authorized; 17,205,995
shares issued at March 31, 2007, December 31, 2006 and March 31, 2006)		172			172			172
Additional paid-in capital		76,197			75,520			78,460
Retained earnings		70,798			70,406			67,928
Unearned compensation		(5,661	)		(5,772	)		(6,012	)
Accumulated other comprehensive loss		(1,508	)		(1,951	)		(3,256	)
Treasury stock, at cost (109,861 shares at March 31, 2007 and 51,445 shares
at December 31, 2006)		(1,513	)		(664	)		-
Total stockholders' equity		138,485			137,711			137,292
Total liabilities and stockholders' equity	$	1,033,698		$	1,009,433		$	947,569

 

UNITED FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED INCOME STATEMENTS (unaudited)
(Amounts in thousands, except per share amounts)
	Three Months Ended
	March 31,
	2007		2006
Interest and dividend income:
Loans	$	11,955	$	9,600
Investments		1,982		2,305
Other interest-earning assets		375		242
Total interest and dividend income		14,312		12,147
Interest expense:
Deposits		5,181		4,042
Borrowings		2,175		1,197
Total interest expense		7,356		5,239
Net interest income before provision for loan losses		6,956		6,908
Provision for loan losses		284		162
Net interest income after provision for loan losses		6,672		6,746
Non-interest income:
Gain on sales of securities		14		-
Fee income on depositors’ accounts		1,038		946
Wealth management income		121		57
Income from bank-owned life insurance		35		81
Other income		190		174
Total non-interest income		1,398		1,258
Non-interest expense:
Salaries and benefits		3,838		3,028
Occupancy expenses		491		403
Marketing expenses		322		415
Data processing expenses		642		632
Professional fees		389		256
Other expenses		965		1,042
Total non-interest expense		6,647		5,776
Income before income taxes		1,423		2,228
Income tax expense		589		873
Net income	$	834	$	1,355
Earnings per share:
Basic	$	0.05	$	0.08
Diluted	$	0.05	$	0.08
Weighted average shares outstanding:
Basic		16,274		16,601
Diluted		16,333		16,601

UNITED FINANCIAL BANCORP, INC. AND SUBSIDIARY
SELECTED DATA AND RATIOS (unaudited)
(Dollars in thousands, except per share amounts)
	At or For The Quarters Ended
	Mar. 31			Dec. 31			Sep. 30			Jun. 30			Mar. 31
	2007			2006			2006			2006			2006
Operating Results:
Net interest income	$	6,956		$	6,938		$	6,944		$	6,765		$	6,908
Loan loss provision		284			342			165			300			162
Non-interest income		1,398			1,399			1,294			1,441			1,258
Non-interest expenses		6,647			6,845			5,580			5,836			5,776
Net income		834			766			1,513			1,290			1,355
Performance Ratios (annualized):
Return on average assets		0.33	%		0.31	%		0.62	%		0.55	%		0.59	%
Return on average equity		2.41	%		2.23	%		4.44	%		3.75	%		3.93	%
Net interest margin		2.82	%		2.89	%		2.96	%		2.96	%		3.10	%
Non-interest income to average total assets		0.55	%		0.57	%		0.53	%		0.61	%		0.55	%
Non-interest expense to average total assets		2.62	%		2.77	%		2.30	%		2.47	%		2.51	%
Efficiency ratio		79.57	%		82.10	%		67.73	%		71.12	%		70.73	%
Per Share Data:
Diluted earnings per share	$	0.05		$	0.04		$	0.09		$	0.08		$	0.08
Book value per share	$	8.10		$	8.03		$	7.95		$	8.00		$	7.98
Market price at period end	$	14.85		$	13.80		$	12.93		$	13.31		$	12.03
Risk Profile
Non-performing assets as a percent of total assets		0.13	%		0.18	%		0.26	%		0.28	%		0.18	%
Non-performing loans as a percent of total loans, gross		0.17	%		0.17	%		0.27	%		0.33	%		0.26	%
Allowance for loan losses as a percent of total loans, gross		0.94	%		0.95	%		0.94	%		0.98	%		1.02	%
Allowance for loan losses as a percent of non-performing loans		570.35	%		560.40	%		341.78	%		249.82	%		390.27	%
Equity as a percentage of assets		13.40	%		13.65	%		13.90	%		14.31	%		14.49	%
Average Balances
Loans	$	776,301		$	746,256		$	714,918		$	669,409		$	640,832
Securities		180,491			194,786			211,101			220,845			227,373
Total interest earning assets		985,112			959,650			939,591			914,729			890,218
Total assets		1,016,369			988,944			969,962			945,262			921,155
Deposits		691,532			688,104			687,397			686,630			658,530
FHLB advances		170,727			150,301			134,833			111,316			112,641
Capital		138,296			137,219			136,279			137,639			137,768
Average Yields/Rates (annualized)
Loans		6.16	%		6.23	%		6.18	%		6.02	%		5.99	%
Securities		4.39	%		4.28	%		4.16	%		4.10	%		4.06	%
Total interest earning assets		5.81	%		5.81	%		5.74	%		5.52	%		5.46	%
Savings accounts		0.86	%		0.84	%		0.84	%		0.83	%		0.82	%
Money market/NOW accounts		2.69	%		2.69	%		2.64	%		2.61	%		2.45	%
Certificates of deposit		4.50	%		4.48	%		4.27	%		4.07	%		3.71	%
FHLB advances		4.74	%		4.79	%		4.69	%		4.03	%		3.97	%
Total interest-bearing liabilities		3.77	%		3.73	%		3.57	%		3.30	%		3.05	%