2017 Annual Report

2017 Annual Report - UFASI UniBank Fiscal Advisory ...ufasi.com/wp-content/uploads/2018/07/UniBank-Annual-Report-2017.pdf · • UniPay was a great source of revenue in 2017 reflecting

  • Upload

  • View

  • Download

Embed Size (px)

Citation preview

  • 2017


  • 43

    UniBank continued to make investments for the future during 2017. We were pleased to enter the Shrewsbury market,

    opening our newest branch in September. This branch highlights both our signature personalized service and our

    commitment to the latest technology, offering a multi-function interactive teller machine (ITM). Likewise, we continued to

    deliver enhancements to our online and mobile banking applications, added convenient functionality to the UniPay online

    payment platform, and premiered “e by UniBank,” our digital-forward money management package that offers premium

    deposit rates.

    In 2017, we saw the retirement of our Interim President and CEO, Bill Mahoney, and the hiring of Sam Pepper, Jr. as the

    new President and CEO. We look forward to prosperous times ahead under Sam’s leadership.

    Finally, we would like to offer our sincere thanks to our customers and communities, and everyone associated with

    UniBank. As we move confidently forward, we reflect on the many successes of the past year and renew our

    commitment to making life better for those we are privileged to serve.


    The Board and Management of UniBank for Savings are pleased to report solid operating results for 2017, and prospects

    for an even better 2018. Enhancements in technology, new products and services for customers, and a continued

    commitment to serving our communities all lie ahead for our forward-thinking, 147 year-old mutual bank.

    This year was another year of strong loan growth for UniBank. Our loan portfolio ended the year at $1.2 billion, an

    increase of 8% year over year. This growth was well diversified, consisting of residential real-estate, consumer,

    commercial and small business loans. In support of this lending, our deposit base also grew, ending the year at $1.5

    billion, up 4% for the year. We have continued to benefit from our market leading position in municipal banking across the

    state, and we experienced organic consumer and commercial growth in our core Central Massachusetts markets as well.

    Late in December of 2017, the U.S. Federal Government enacted the “Tax Cuts and Jobs Act of 2017,” reducing the

    corporate tax rate from 35% to 21% beginning in 2018. This reduced tax rate will benefit our earnings going forward, but

    it created a one-time tax expense for 2017 that reduced our net income for the year. Like most banks and many other

    companies around the country, the bank holds deferred tax assets that had to be revalued as a result of the decrease in

    future tax rates. This led to a one-time charge of $3.6 million. While the Bank recorded solid pre-tax earnings of $12.1

    million, this charge reduced after-tax net income to $4.8 million. We estimate that this charge will be recovered through

    reduced future taxes within the next 18 months.

    WelcomeSam S. Pepper, Jr. and Timothy P. Wickstrom

    Sam S. Pepper, Jr. President and CEO

    Timothy P. WickstromChairman of the Board

  • 65


    In 2017, we saw many changes and a reinvestment

    in our franchise.

    We welcomed several new members to our team,

    including Sam Pepper, Jr., as President and CEO; Gary

    Baxter as SVP and CIO and Maureen Huffam as SVP

    of Human Resources. These additions have

    already made a positive impact on our company,

    and we’re excited to see what contributions they’ll

    make next.

    We launched an entirely new UniBank brand. It was

    the first update to UniBank’s look and feel since 2000.

    Our new brand position communicates everything

    we value and provides us with a strong position in the

    market. This new identity will confidently carry us

    into the future.

    We entered a new market as we opened our newest

    branch in Shrewsbury. The Shrewsbury branch

    highlights the future of banking, offering the latest

    technology and driving home our commitment to

    personalized service.

    With what we’ve accomplished in 2017 — detailed

    above and in the three stories to follow — we’re well

    positioned for a profitable 2018.


    Located at the former location of the iconic Spag’s, our

    Shrewsbury branch is the first location to fully feature our

    new brand. This branch showcases UniBank’s new look

    and feel, as well as our new message of “Bank Different.

    Bank Unique.” The interior is sleek and modern, featuring

    UniBank’s signature brand colors and patterns.

    This state-of-the-art branch features updated technology

    in the form of a new interactive teller machine (ITM).

    More than an ATM, the ITM is interactive and can

    dispense money in exact change, accept deposits, cash

    checks and more. It can do almost all of the functions of

    a bank teller, including an option for a “live chat” with a

    Customer Contact representative, if needed.

    Since opening, the new branch has generated almost

    $3 million in mortgage, home equity, and personal loans,

    as well as nearly $8.5 million in deposits.


    UniPay, a leader in payment solutions in Massachusetts,

    had another great year in 2017.

    • We grew more than 12.1% in transactions processed

    for a total of 1,566,040 transactions*

    • The number of residents that registered in our system

    to save their payment data increased 15.5% over 2016,

    with 532,247 people now registered in the system

    • UniPay was a great source of revenue in 2017

    reflecting growth of 13.1% from 2016

    The biggest enhancements in 2017 were the addition of

    recurring payments and auto payments. Now, customers

    can register to have their bills paid automatically, allowing

    them to “set it and forget it” or set up recurring payments.

    We began development for other feature functionality,

    including “pay by text” and the ability to utilize PayPal as

    a payment option. We expect both to be available in 2018.

    2018 will continue to bring efficiencies to our clients with

    system enhancements. One efficiency to be added to

    the current suite of services will be enhanced reporting

    capabilities which is sure to save our clients time

    and money.

    We continued to add to our client base in 2017, bringing

    on new departments within each city and town where

    UniPay is active. We have added transactions for

    departments, including Town Collector, Town Clerk,

    Airports, Golf Courses, Council on Aging, Recreation,

    Town Police, Town Library, Public and Regional Schools,

    Harbor Master, Human Resources, Health Department

    and Cemeteries.

    This has been an extremely successful year in terms

    of expanding our department base and penetrating our

    payment system into new areas of our clients’ business.

    *The total dollars processed was $647,353,594, an amazing increase of 22.5% over 2016

    A Look Back

    For the opening week of the Shrewsbury location, we performed random acts of kindness and also made a $50,000 charitable donation commitment to the Shrewsbury community.

    UniPay offers: • 24/7 convenience for your customers• Customizable payment options • Real-time reporting• Fast remittance to your bank account• Fast updates• Easy account reconciliation• Flexible lock box download capabilities• And more!

    UniBank’s Community Giving Program encouraged customers and the general public to vote from a selection of eight community organizations that were identified by UniBank. In total, $13,000 was given to Shrewsbury organizations as part of the program.

    (left-right): Karen Chapman, President, Corridor Nine Area Chamber of Commerce; Christopher Foley, SVP, Director of Retail Banking, UniBank; Wendy Brown, VP, Regional Manager, UniBank; Mary Simone, Chair, Corridor Nine Area Chamber of Commerce; Matthew Armenti, Shrewsbury Branch Manager, UniBank; Sam J. Pepper, Jr., President & CEO, UniBank; Moira Miller, Shrewsbury Selectman; Tim Kane, Shrewsbury Selectman; Moe DePalo, Shrewsbury Selectman.

  • 7


    We’re pleased to report that UniBank’s innovative

    Invest Worcester program has completed its first year,

    with impressive results. Invest Worcester currently has

    deposits of $3.7 million and $9.4 million in loans to

    Worcester-based businesses, non-profits and home

    buyers. The Invest Worcester program guarantees

    depositors that their money will “stay home” and be

    used to help make Worcester a better place to live.

    In developing the Invest Worcester program, UniBank

    addressed a feeling many people have: “I’m just one

    person, what can I do to address Worcester’s challenges?”

    Invest Worcester creates a “partnership” between

    UniBank, individuals and businesses, allowing depositors

    to pool resources and invest in Worcester. Deposits range

    from under $100 to well into the thousands.

    These deposits are leveraged and made available for loans

    within Worcester to promote home ownership, help small

    businesses grow, and assist in community development

    projects. Among those receiving Invest Worcester loans

    during 2017 were the Worcester Business Development

    Corporation (WBDC), Domitek, Ready 2 Run Graphics, the

    Worcester Historical Museum, and more.

    Invest Worcester is not a charity. Depositors currently

    earn a premium rate of interest on their deposits, while

    also enjoying the security of insurance backed by the

    FDIC and DIF. All loans offered through the Invest

    Worcester program must meet UniBank’s underwriting

    requirements and be repaid so new loans can be made

    to other qualifying businesses and foundations.

    Media Coverage and Accolades for Invest Worcester

    Launched on November 28, 2016, UniBank’s Invest Worcester Program was given Honorable Recognition within the category of Community and Economic Development in the 2017 American Banker’s Association Community Commitment Awards.

    Invest Worcester is a socially responsible savings account that leverages the money deposited to provide loans in Worcester at favorable terms for homeownership, community development, and to help small businesses prosper.

  • 119



    UFASI maintained its track record of assisting our municipal clients with financing critical projects such as new schools,

    libraries, roads, and infrastructure. We are also constantly on the look-out for refinancing opportunities, which save our

    clients, and their taxpayers, significant amounts in debt service costs. Through the use of competitive debt sales, UFASI

    is able to ensure the lowest possible cost to borrow in any given market conditions. In 2017, we assisted in 306 individual

    transactions, totaling over $861 million. UFASI’s efforts contributed $1.6 million in gross revenue to UniBank’s fee income

    line item.


    UniPayDirect, our secure payment collection solution designed for community banks, municipalities and partner

    organizations to collect online payments, had a solid year in 2017. Our partner banks continue to see growth in UniPay

    transactions resulting in fee income for the franchise. We continue to meet with banks and have a healthy pipeline we

    expect to convert to customers in fiscal year 2018.


    Sterling Associates took advantage of the rebounding economy in 2017 to increase revenue to a new high of $3.5 million.

    This represented year-over-year growth of 11%. The company contribution to UniBank’s loan portfolio was $110 million,

    which helped push Sterling past the $300 million mark in 2017. These numbers reflect Sterling’s growing contribution to

    the Bancorp, adding pretax earnings in excess of $1 million for the year.


    This was a big year for us. We launched a new brand and

    expanded into new markets. In addition to expanding into

    Shrewsbury, we began a year-long project converting our

    legacy branches to reflect the look of our new brand.

    We expect interior transformation to be completed by

    June 2019.

    We held a series of mortgage seminars that generated

    an additional $2 million in new mortgage loans. And

    our Customer Contact Center assisted nearly 80,000

    customers via phone inquiries. We also held several

    small business seminars on a variety of topics to help

    local small businesses prosper.


    UniBank’s Government Banking department continues

    to be a leader in Massachusetts, providing municipal

    services to well over 85% of the municipalities in the state.

    UniBank continues to be the only community bank with a

    department fully dedicated to the municipal marketplace.

    Through our UniPay product, growing numbers of

    municipal departments collect payments electronically,

    providing both convenience and efficiencies for residents

    and municipalities. UniBank’s electronic bill presentment

    offers municipalities a “green” solution, saving thousands

    of dollars on both printing and postage.


    It was another great year for lending at UniBank, with

    several areas of growth as compared to 2016.


    • Increased our in-house portfolio by 10.15%

    or $33.5 million

    • Our year-end in-house mortgage portfolio

    stands at $363.9 million


    • Increased our Freddie Mac portfolio by 1% or

    $3.3 million

    • Year-end Freddie Mac portfolio stands at

    $335.6 million

    • Generated $521.6 thousand in Loan Sale Income

    • Generated $839.0 thousand in gross servicing income


    • Increased our consumer portfolio by 10.5% or

    $39.9 million

    • Year-end portfolio stands at $420.0 million


    • Loan originations: $5 million — nearly doubled from 2016

    • Ranked #7 for SBA lending with 64 new SBA loans


    Once again, UniBank was voted Best Bank for Business

    by Worcester Business Journal readers. UniBank had a

    strong year in terms of commercial loan originations with

    $86.1 million in new loans and $15 million in net growth.

    Here’s a snapshot of our 2017 Commercial Lending


    • Outstanding commercial loans: $411.4 million

    (3.87% growth)

    • Commercial deposits: $54.6 million

    • Commercial cash management fee income: $299,581

    2017 in review $699,565,977


    Total Residential In-House and Freddie Mac Loan Portfolios

    Total Residential In-House, Freddie and Consumer Portfolio

  • 12



    Though 2017 was a year of change, it was also

    a year of giving back. We had several employees

    volunteer their time as Committee and Board

    Members for over 30 community organizations.

    Employees spent four nights over the course of the

    year preparing and serving dinner at the Peace of

    Bread Community Kitchen in Whitinsville. Seventeen

    employees volunteered at the Community Harvest

    Project, where they grew fresh fruits and vegetables

    to provide to those experiencing hunger. In May,

    UniBank held an apparel drive to benefit the

    Worcester Area Dress for Success. This organization

    provides many resources to empower a diverse

    population of women from our community to

    re-enter the workforce.


    In addition to community service, UniBank

    employees gave back through financial outreach

    in 2017. Throughout the year, we presented 13 First-

    Time Homebuyer Seminars and Small Business

    seminars in Milford, Grafton, and Whitinsville.

    UniBank employees conducted FDIC SmartMoney

    Financial Literacy Training at the Worcester Summer

    Youth Training Symposium. Employees volunteered

    for the Worcester Free Tax Service Coalition, as

    well as participated in the Nipmuc Regional School

    District Financial Reality Fair, where they spoke with

    250 sophomores and juniors about their checking

    and savings choices.

    Named Corporate

    Citizen of The Year by

    the Worcester Educational

    Development Foundation

    Won the March of

    Dimes bank challenge

    Laid the groundwork

    to launch a comprehensive

    Financial Literacy Program

    Provided $46,000

    in college scholarships

    UniBank awarded a total of $46,000 in scholarships to twenty-three class of 2017 graduates from local high schools in the towns of Blackstone, Douglas, Grafton, Hopedale, Hopkinton, Milford, Shrewsbury, Sutton, Upton, Uxbridge, Whitinsville, and Worcester as part of the bank’s annual scholarship program supporting the educational endeavors of exceptional students in the towns served by UniBank.

    (left-right): Joe Vettese, Relationship Banker Supervisor of UniBank’s Shrewsbury branch, purchased goods for Kristen Vigliotti at the Bean Counter Café as part of UniBank’s Random Acts of Kindness giving program.

    Each one of you has made an impact on our

    business. As we continue to move into our

    company’s bright future, we are honored to

    have all of you along for the journey.


  • 150,000





    02014 2015 2016 2017


    $ IN












    02014 2015 2016 2017


    $ IN











    02014 2015 2016 2017


    $ IN











    02014 2015 2016 2017


    $ IN






    UFS Bancorp and SubsidiaryConsolidated Statements of Condition

    December 31(Dollars in Thousands)

    2017 2016


    Cash and due from banks $ 5,704 $ 6,191

    Interest-bearing deposits 29,532 19,370

    Short-term investments 2 3

    Total cash and cash equivalents 35,238 25,564

    Securities available for sale, at fair value 289,614 317,710

    Securities held to maturity 42,347 39,226

    Federal Home Loan Bank stock, at cost 4,083 3,498

    Loans, net of allowance for loan losses of $11,861,000 in 2017 and $10,723,000 in 2016 1,183,914 1,097,822

    Premises and equipment, net 20,020 21,002

    Accrued interest receivable 3,617 3,193

    Deferred income taxes 7,874 10,151

    Bank-owned life insurance 8,628 8,411

    Other assets 5,294 5,755

    Total Assets $ 1,600,629 $ 1,532,332


    Deposits $ 1,451,573 $ 1,392,079

    Mortgagors' escrow accounts 1,200 1,064

    Accrued expenses and other liabilities 12,392 8,317

    Total liabilities 1,465,165 1,401,460

    Retained earnings 140,125 134,507

    Accumulated other comprehensive income (4,661) (3,635)

    Total retained earnings 135,464 130,872

    Total Liabilities & Retained Earnings $ 1,600,629 $ 1,532,332

    UFS Bancorp and SubsidiaryConsolidated Statements of Income

    December 31(Dollars in Thousands)

    2017 2016

    Interest and dividend income:

    Loans, including fees $ 43,713 $ 40,956

    Debt securities 5,939 5,489

    Equity securities 159 162

    Interest-bearing deposits and short term investments 733 531

    Total interest and dividend income 50,544 47,138

    Interest expense:

    Deposits 4,734 4,194

    Federal Home Loan Bank advances 176 16

    Total interest expense 4,910 4,210

    Net interest income 45,634 42,928

    Provision for loan losses 1,200 990

    Net interest income, after provision for loan losses 44,434 41,938

    Non-interest income:

    Customer service fees 4,794 4,779

    Loan referral fees 3,129 2,940

    Fiscal advisory service fees 1,614 1,741

    Gain on sale of securities, net 10 43

    Gain on sale of loans, net 419 1,028

    Other 1,043 1,076

    Total non-interest income 11,009 11,607

    Non-interest expenses:

    Salaries and employee benefits 25,387 23,272

    Occupancy and equipment 6,556 6,479

    Professional services 1,836 1,755

    Data processing services 2,207 2,004

    FDIC deposit insurance 1,099 1,077

    Advertising and marketing 2,091 1,507

    Other general and administrative 4,180 3,790

    Total non-interest expenses 43,356 39,884

    Income before income taxes 12,087 13,661

    Provision for income taxes 7,278 4,421

    Net income $ 4,809 $ 9,240

  • 2017