Why United Financial Bancorp Inc. Shares Rang the Register

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of United Financial Bancorp (NASDAQ: UBNK  ) , a Connecticut-based community bank that offers deposit and loan, as well as asset management services to consumers and small businesses, jumped as much as 12% after announcing a merger with Rockville Financial (NASDAQ: RCKB  ) .

So what: According to the terms of this stock-for-stock merger deal, United Financial Bancorp shareholders will receive 1.3472 shares of Rockville Financial common stock for each share of United Financial that they own. When the merger is completed, United Financial shareholders will control 51% of shares, and Rockville shareholders 49%. The combined entity will create the largest community bank in the Hartford -- Springfield area of Connecticut, and boast $4.8 billion in assets, as well as 50 branches. Cost synergies from the deal are expected to be $17.6 million, or roughly 15% of the combined expenses of these two banks.

Now what: I don't care if I've beaten this horse a hundred times... I'm going to beat it again. If there's an industry more ripe for consolidation than any other industry in this marketplace, it's small-cap regional banks. There are simply too many banks, and far too many cautious consumers, these days to justify so many smaller banks trying to compete against each other -- especially in the Northeast and Mid-Atlantic regions. Overall, I would expect this trend to continue, and for United Financial to possibly chug higher once we get an idea of how efficient these two banks can be when working as one.

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