First Connecticut Bancorp, Inc. reports second quarter 2014 earnings of $0.15 basic and $0.14
diluted earnings per share driven by a 47% increase in linked quarter earnings
FARMINGTON, Conn., July 24, 2014 – First Connecticut Bancorp, Inc. (the “Company”) (NASDAQ: FBNK), the holding company for Farmington Bank (the “Bank”), reported net income of $2.2 million, or $0.15 basic and $0.14 diluted earnings per share for the quarter ended June 30, 2014 compared to net income of $1.5 million, or $0.10 basic and diluted earnings per share in the linked quarter. Basic and diluted earnings per share were $0.05 for the second quarter of 2013.
“We are pleased with our second quarter results which reflect a significant lift in earnings, driven by our core banking activities of taking in deposits and making loans. The strategic investments made in our company over the past several years are beginning to be reflected in our earnings which have increased 47% linked quarter and 167% year over year. We continue to reward shareholders by growing tangible book value and paying dividends,” stated John J. Patrick Jr., First Connecticut Bancorp’s Chairman, President & CEO.
Financial Highlights
| · | Net interest income increased $814,000 to $15.6 million in the second quarter of 2014 compared to $14.8 million in the linked quarter and increased $2.7 million or 21% compared to second quarter of 2013. |
| · | Strong organic loan growth continued during the quarter as total loans increased $76.2 million to $1.9 billion at June 30, 2014 and increased $343.0 million or 21% from a year ago. |
| · | Noninterest expense to average assets was 2.60% in the second quarter of 2014 compared to 2.63% in the linked quarter and 3.17% in the second quarter of 2013. |
| · | Tangible book value per share grew to $14.39 compared to $14.22 on a linked quarter basis and $13.81 at June 30, 2013. |
| · | Checking accounts grew by 3.2% or 1,321 net new accounts in the second quarter of 2014. |
| · | Asset quality remains stable as loan delinquencies 30 days and greater decreased slightly to 0.78% of total loans at June 30, 2014 compared to 0.80% of total loans at March 31, 2014. Non-accrual loans represented 0.75% of total loans compared to 0.69% of total loans on a linked quarter basis. |
| · | During the second quarter of 2014, the Company repurchased 131,296 shares of common stock at an average price per share of $15.49 at a total cost of $2.0 million. Repurchased shares will be held as treasury stock and will be available for general corporate purposes. |
| · | The Company paid a cash dividend of $0.04 per share on June 16, 2014, an increase of $0.01 compared to the linked quarter. This marks the eleventh consecutive quarter the Company has paid a dividend since it became a public company on June 29, 2011. |
Second quarter 2014 compared with first quarter 2014
Net interest income
| · | Net interest income increased $814,000 to $15.6 million in the second quarter of 2014 compared to the linked quarter due primarily to a $70.6 million increase in the average net loan balance and a 2 basis point increase in the net interest rate spread to 2.88%. |
| · | Net interest margin increased to 3.01% in the second quarter of 2014 compared to 2.99% in the first quarter of 2014. |
| · | The cost of interest-bearing liabilities declined to 57 basis points in the second quarter of 2014 compared to 58 basis points in the first quarter of 2014. |
Provision for loan losses
| · | Provision for loan losses was $410,000 for the second quarter of 2014 compared to $505,000 for the linked quarter. |
| · | Net charge-offs in the quarter were $128,000 or 0.03% to average loans (annualized) compared to $1.2 million or 0.26% to average loans (annualized) in the linked quarter. |
| · | The allowance for loan losses represented 0.92% of total loans at June 30, 2014 compared to 0.94% at March 31, 2014. |
Noninterest income
| · | Total noninterest income increased $304,000 to $2.1 million in the second quarter of 2014 compared to the linked quarter due to a $195,000 increase in net gain on loans sold and $126,000 increase in fees for customer services. |
Noninterest expense
| · | Noninterest expense increased $294,000 or 2% to $14.3 million in the second quarter of 2014 compared to the linked quarter as a result of increases in salaries and employee benefits and marketing expenses offset by decreases in occupancy expense and other operating expenses. Occupancy expenses were up in the first quarter of 2014 due to winter related expenses. |
Income tax expense
| · | Income tax expense was $776,000 in the second quarter of 2014 compared to $555,000 in the linked quarter. |
Second quarter 2014 compared with second quarter 2013
Net interest income
| · | Net interest income increased $2.7 million or 21% to $15.6 million compared to $12.9 million in the second quarter of 2013 primarily due to a $312.6 million increase in the average net loan balance despite a 14 basis point decrease in the yield on loans. |
| · | Net interest margin was 3.01% for both quarters. Excluding resort and prepayment penalty fee income for both quarters, the net interest margin would have been 2.97% and 2.98% in the second quarters of 2014 and 2013, respectively. |
| · | The cost of interest-bearing liabilities declined 19 basis points to 57 basis points in the second quarter of 2014 compared to 76 basis points in the second quarter of 2013 due primarily to a 12 basis point decrease in certificate of deposits and a decrease in Federal Home Loan Bank of Boston advance costs due to an increase in short-term advances which carry lower rates. |
Provision for loan losses
| · | Provision for loan losses was $410,000 for the second quarter of 2014 compared to $256,000 for the prior year quarter. |
| · | Net charge-offs in the quarter were $128,000 or 0.03% to average loans (annualized) compared to $83,000 or 0.02% to average loans (annualized) in the prior year quarter. |
| · | The allowance for loan losses represented 0.92% of total loans at June 30, 2014 compared to 1.09% at June 30, 2013. |
Noninterest income
| · | Total noninterest income decreased $933,000 to $2.1 million compared to the prior year quarter primarily due to a $1.3 million decrease in net gain on loans sold primarily as a result of a decrease in the dollar amount of loans sold, offset by a $220,000 increase in fees for customer services. |
Noninterest expense
| · | Noninterest expense decreased $301,000 or 2% to $14.3 million in the second quarter of 2014 compared to the prior year quarter. |
Income tax expense
| · | Income tax expense was $776,000 in the second quarter of 2014 compared to $256,000 in the prior year quarter. |
Financial Condition
| · | Total assets increased $422.3 million or 23% at June 30, 2014 to $2.3 billion compared to $1.8 billion at June 30, 2013 largely reflecting an increase in loans and securities. |
| · | Our investment portfolio totaled $173.5 million at June 30, 2014 compared to $115.8 million at June 30, 2013, an increase of $57.7 million. |
| · | Net loans increased $342.4 million at June 30, 2014 to $1.9 billion compared to $1.6 billion at June 30, 2013 due to our continued focus on commercial and residential lending, which combined, increased $356.1 million. |
| · | Deposits increased $178.5 million at June 30, 2014 to $1.6 billion compared to $1.5 billion at June 30, 2013, due to increases in municipal deposits, noninterest-bearing deposits and de novo branch openings as we continue to develop and grow relationships in the geographical areas we serve. |
| · | Federal Home Loan Bank of Boston advances increased $239.8 million to $291.0 million at June 30, 2014 compared to $51.3 million at June 30, 2013. Advances were used to support loan and securities growth. |
Asset Quality
| · | At June 30, 2014, the allowance for loan losses represented 0.92% of total loans and 122.25% of non-accrual loans, compared to 1.09% of total loans and 122.20% of non-accrual loans at June 30, 2013. |
| · | Loan delinquencies 30 days and greater decreased to 0.78% of total loans at June 30, 2014 compared to 0.95% of total loans at June 30, 2013. |
| · | Non-accrual loans represented 0.75% of total loans at June 30, 2014 compared to 0.89% of total loans at June 30, 2013. |
| · | Net charge-offs in the quarter were $128,000 or 0.03% to average loans (annualized) compared to $83,000 or 0.02% to average loans (annualized) in the prior year quarter. |
Capital and Liquidity
| · | The Company remained well-capitalized with an estimated total capital to risk-weighted asset ratio of 14.56% at June 30, 2014. |
| · | Tangible book value per share grew to $14.39 compared to $14.22 on a linked quarter basis and $13.81 at the quarter ended June 30, 2013. |
| · | During the second quarter of 2014, the Company repurchased 131,296 shares of common stock at an average price per share of $15.49 at a total cost of $2.0 million. Repurchased shares will be held as treasury stock and will be available for general corporate purposes. |
| · | At June 30, 2014, the Company continued to have adequate liquidity including significant unused borrowing capacity at the Federal Home Loan Bank of Boston and the Federal Reserve Bank, as well as access to funding through brokered deposits. |
About First Connecticut Bancorp, Inc.
First Connecticut Bancorp, Inc. (NASDAQ: FBNK) is a Maryland-chartered stock holding company that wholly owns Farmington Bank. Farmington Bank is a full-service, community bank with 22 branch locations throughout central Connecticut. Established in 1851, Farmington Bank is a diversified consumer and commercial bank with an ongoing commitment to contribute to the betterment of the communities in our region. For more information regarding the Bank’s products and services and for First Connecticut Bancorp, Inc. investor relations information, please visit www.farmingtonbankct.com.
Conference Call
First Connecticut will host a conference call on Thursday, July 24, 2014 at 1:00pm Eastern Time to discuss second quarter results. Those wishing to participate in the call may dial-in to the call at 1-888-336-7151. The international dial-in number is 1-412-902-4177. A webcast of the call will be available on the Investor Relations Section of the Farmington Bank website for an extended period of time.
Forward Looking Statements
In addition to historical information, this earnings release may contain forward-looking statements for purposes of applicable securities laws. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Such forward-looking statements may or may not include words such as “believe,” “expect,” “anticipate,” “estimate,” and “intend” or future or conditional verbs such as “will,” “would,” “should,” “could,” or “may.” Forward-looking statements are subject to numerous assumptions, risks and uncertainties. There are a number of important factors described in documents previously filed by the Company with the Securities and Exchange Commission, and other factors that could cause the Company's actual results to differ materially from those contemplated by such forward-looking statements. The Company undertakes no obligation to publicly release the results of any revisions to those forward-looking statements which may be made to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events.
Non-GAAP Financial Measures
In addition to evaluating the Company’s financial performance in accordance with U.S. generally accepted accounting principles (“GAAP”), management routinely supplements their evaluation with an analysis of certain non-GAAP financial measures, such as core net income, the efficiency ratio and tangible book value per share. A reconciliation to the most directly comparable GAAP financial measure; net income in the case of core net income and the efficiency ratio and stockholders’ equity in the case of tangible book value per share, appears in tabular form in the accompanying Reconciliation of Non-GAAP Financial Measures table.
We believe that providing certain non-GAAP financial measures provides investors with information useful in understanding our financial performance, our performance trends and financial position. Specifically, we provide measures based on what we believe are our operating earnings on a consistent basis and exclude non-core operating items which affect the GAAP reporting of results of operations. The Company believes that core net income is useful for both investors and management to understand the effects of items that are non-recurring and infrequent in nature. The Company believes that the efficiency ratio, which measures the costs expended to generate a dollar of revenue, is useful in the assessment of financial performance, including non-interest expense control. The Company believes that tangible book value per share is useful to evaluate the relative strength of the Company’s capital position. The Company does not have goodwill and intangible assets for any of the periods presented. As such, tangible book value per common share is equal to book value per common share.
We utilize these measures for internal planning and forecasting purposes. These non-GAAP financial measures should not be considered a substitute for GAAP basis measures and results, and we strongly encourage investors to review our consolidated financial statements in their entirety and not to rely on any single financial measure.
