First Connecticut Bancorp, Inc. reports third quarter 2015 earnings of $0.28 earnings per share
FARMINGTON, Conn., October 21, 2015 – First Connecticut Bancorp, Inc. (the "Company") (NASDAQ: FBNK), the holding company for Farmington Bank (the "Bank"), reported net income of $4.2 million, or $0.28 diluted earnings per share for the quarter ended September 30, 2015 compared to net income of $2.5 million, or $0.17 diluted earnings per share for the quarter ended September 30, 2014.
Net income on a core earnings basis was $3.9 million, or $0.25 diluted core earnings per share for the quarter ended September 30, 2015 compared to $2.5 million, or $0.17 diluted core earnings per share for the quarter ended September 30, 2014. Core earnings exclude non-recurring items.
"The impact of our organic growth strategy and commitment to improve earnings and consequently grow tangible book value and earnings per share is evident in our results this quarter" stated John J. Patrick Jr., First Connecticut Bancorp's Chairman, President and CEO.
"We opened our 23rd branch office in West Springfield, MA on October 6, 2015 and anticipate opening our 24th branch office in East Longmeadow, MA in November. We have received regulatory approval to open two additional branch offices in Manchester, CT and Vernon, CT in the first half of 2016."
Financial Highlights
| · | Net interest income increased $573,000 to $17.7 million in the third quarter of 2015 compared to the linked quarter and increased $1.7 million or 11% compared to the third quarter of 2014. |
| · | Net gain on loans sold increased $581,000 to $993,000 in the third quarter of 2015 compared to the linked quarter primarily due to selling $83.2 million of fixed rate residential portfolio loans to reposition the balance sheet and maintain our asset sensitive interest rate position. |
| · | Strong organic loan growth continued during the quarter as total loans increased $50.4 million to $2.3 billion at September 30, 2015 and increased $287.6 million or 14% from a year ago. Loan growth during the quarter was primarily driven by an $82.0 million increase in the commercial loan portfolio offset by a $31.5 million decrease in the residential loan portfolio. |
| · | Overall deposits increased $95.3 million to $2.0 billion in the third quarter of 2015 compared to the linked quarter and increased $245.4 million or 14% from a year ago. |
| · | Checking accounts grew by 3.0% or 1,432 net new accounts in the third quarter of 2015 and by 11.8% or 5,182 net new accounts from a year ago. |
| · | Core noninterest expense to average assets was 2.26% in the third quarter of 2015 compared to 2.39% in the linked quarter and 2.46% in the third quarter of 2014. |
| · | Tangible book value per share is $15.30 compared to $15.01 on a linked quarter basis and $14.56 at September 30, 2014. |
| · | Asset quality decreased slightly compared to the linked quarter due to one commercial loan relationship but improved year over year. Loan delinquencies 30 days and greater represented 0.67% of total loans at September 30, 2015 compared to 0.58% at June 30, 2015 and 0.78% at September 30, 2014. Non-accrual loans represented 0.71% of total loans compared to 0.57% of total loans on a linked quarter basis and 0.76% of total loans at September 30, 2014. |
| · | The allowance for loan losses represented 0.86% of total loans at September 30, 2015 and June 30, 2015 and 0.91% at September 30, 2014. |
| · | The Company paid a cash dividend of $0.06 per share on September 14, 2015, an increase of $0.01 compared to the linked quarter. |
Third quarter 2015 compared with second quarter 2015
Net interest income
| · | Net interest income increased $573,000 to $17.7 million in the third quarter of 2015 compared to the linked quarter due primarily to a $117.8 million increase in the average net loan balance offset by a $357,000 increase in interest expense. |
| · | Net interest margin decreased 7 basis points to 2.79% in the third quarter of 2015 compared to 2.86% in the linked quarter due to a 5 basis point decrease in the loan yield and a 2 basis point increase in the cost of interest-bearing liabilities. The decrease in the loan yield was primarily due to lower yields on new loans originated as a result of a low interest rate environment during the quarter. |
| · | The cost of interest-bearing liabilities increased 2 basis points to 66 basis points in the third quarter of 2015 compared to 64 basis points in the linked quarter primarily due to money market and certificate of deposit promotions. |
Provision for loan losses
| · | Provision for loan losses was $386,000 for the third quarter of 2015 compared to $663,000 for the linked quarter. |
| · | Net charge-offs (recoveries) in the quarter were ($43,000) or (0.01%) to average loans (annualized) compared to $314,000 or 0.06% to average loans (annualized) in the linked quarter. |
| · | The allowance for loan losses represented 0.86% of total loans at September 30, 2015 and June 30, 2015. |
Noninterest income
| · | Total noninterest income decreased $833,000 to $3.2 million in the third quarter of 2015 compared to the linked quarter primarily due to no gain on sale of investments during the quarter, a $219,000 decrease in other noninterest income offset by a $581,000 increase in net gain on loans sold. |
| · | Gain on sale of investments was $1.3 million in the second quarter of 2015 due to the sale of a trust preferred security. |
| · | Net gain on loans sold increased $581,000 primarily due to selling $83.2 million of fixed rate residential portfolio loans to reposition the balance sheet and maintain our asset sensitive interest rate position. |
| · | Other income decreased $219,000 to $309,000 in the third quarter of 2015 compared to $528,000 in the linked quarter primarily due to a $95,000 decrease in swap fees and a decrease in mortgage banking derivatives income. |
Noninterest expense
| · | Noninterest expense decreased $879,000 in the third quarter of 2015 to $14.7 million compared to the linked quarter primarily due to a $970,000 decrease in other operating expenses offset by a $267,000 increase in salaries and employee benefits. Noninterest expense on a core basis remained flat at $15.3 million in the third quarter of 2015 compared to the linked quarter. |
| · | Other operating expenses decreased $970,000 on a linked quarter basis primarily due to a $557,000 gain on foreclosed real estate in the third quarter and $258,000 in non-recurring stock compensation costs in the second quarter related to the retirement of two directors and a $149,000 loss on a credit sharing arrangement on a sold loan incurred in the second quarter. |
Income tax expense
| · | Income tax expense was $1.6 million in the third quarter of 2015 compared to $1.4 million in the linked quarter. The increase in income tax expense in the third quarter was primarily due to an $896,000 increase in income before taxes. |
Third quarter 2015 compared with third quarter 2014
Net interest income
| · | Net interest income increased $1.7 million to $17.7 million in the third quarter of 2015 compared to the prior year quarter primarily due to a $362.3 million increase in the average net loan balance offset by an $879,000 increase in interest expense. |
| · | Net interest margin decreased to 2.79% in the third quarter of 2015 compared to 2.91% in the third quarter of 2014 primarily due to a 5 basis point decrease in the yield on interest-earning assets and a 7 basis point increase in the cost of interest-bearing liabilities. |
| · | The yield on interest-earning assets decreased to 3.31% in the third quarter of 2015 compared to 3.36% in the prior year quarter primarily due to a 12 basis point decrease in the yield on average loans offset by increases in the investments yields. |
| · | The cost of interest-bearing liabilities increased to 66 basis points in the third quarter of 2015 compared to 59 basis points in the prior year quarter primarily due to certificate of deposit promotions and entering the brokered deposit market. |
Provision for loan losses
| · | Provision for loan losses was $386,000 for the third quarter of 2015 compared to $1.0 million for the prior year quarter. |
| · | Net charge-offs (recoveries) in the quarter were ($43,000) or (0.01%) to average loans (annualized) compared to $397,000 or 0.08% to average loans (annualized) in the prior year quarter. |
| · | The allowance for loan losses represented 0.86% of total loans at September 30, 2015 compared to 0.91% at September 30, 2014. |
Noninterest income
| · | Total noninterest income increased $463,000 to $3.2 million in the third quarter of 2015 compared to the prior year quarter primarily due to a $360,000 increase in net gain on loans sold, a $77,000 increase in fees for customer services and a $65,000 increase in bank owned life insurance income. |
Noninterest expense
| · | Noninterest expense on a core basis increased $1.1 million in the third quarter of 2015 compared to the prior year quarter primarily due to a $709,000 increase in salaries and employee benefits and a $295,000 increase in other operating expenses. |
| · | Salaries and employee benefits increased $709,000 primarily due to costs associated with our expansion into western Massachusetts, growth driven staff increases in our compliance areas and a general increase to maintain the Bank's growth. |
| · | Other operating expenses increased $295,000 due to a general increase in other costs to support the Bank's operations. |
Income tax expense
| · | Income tax expense was $1.6 million in the third quarter of 2015 compared to $997,000 in the prior year quarter. The increase in income tax expense in the third quarter was primarily due to a $2.3 million increase in income before taxes. |
September 30, 2015 compared to September 30, 2014
Financial Condition
| · | Total assets increased $312.8 million or 13% at September 30, 2015 to $2.7 billion compared to $2.4 billion at September 30, 2014, largely reflecting an increase in loans. |
| · | Our investment portfolio totaled $196.9 million at September 30, 2015 compared to $207.1 million at September 30, 2014, a decrease of $10.3 million. |
| | Net loans increased $286.5 million at September 30, 2015 to $2.3 billion compared to $2.0 billion at September 30, 2014 due to our continued focus on commercial and residential lending. |
| · | Deposits increased $245.4 million at September 30, 2015 to $2.0 billion compared to $1.7 billion at September 30, 2014 primarily due to increases in municipal deposits, demand deposits and time deposits accounts as we continue to develop and grow relationships in the geographical areas we serve. We entered the brokered deposit market during the second quarter of 2015 with balances totaling $55.5 million at September 30, 2015. |
| · | Federal Home Loan Bank of Boston advances increased $68.9 million to $373.6 million at September 30, 2015 compared to $304.7 million at September 30, 2014. Advances were used to support loan and securities growth during the quarter. |
Asset Quality
| · | Asset quality decreased slightly compared to the linked quarter due to one commercial loan relationship totaling $3.5 million at September 30, 2015 was 30 days delinquent and on nonaccrual due to a Chapter 11 Bankruptcy filing. |
| · | At September 30, 2015, the allowance for loan losses represented 0.86% of total loans and 120.05% of non-accrual loans, compared to 0.86% of total loans and 150.94% of non-accrual loans at June 30, 2015 and 0.91% of total loans and 119.91% of non-accrual loans at September 30, 2014. |
| · | Loan delinquencies 30 days and greater represented to 0.67% of total loans at September 30, 2015 compared to 0.58% of total loans at June 30, 2015 and 0.78% of total loans at September 30, 2014. |
| · | Non-accrual loans represented 0.71% of total loans at September 30, 2015 compared to 0.57% of total loans at June 30, 2015 and 0.76% of total loans at September 30, 2014. |
| · | Net charge-offs (recoveries) in the quarter were ($43,000) or (0.01%) to average loans (annualized) compared to $314,000 or 0.06% to average loans (annualized) in the linked quarter and $397,000 or 0.08% 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 12.72% at September 30, 2015. |
| · | Tangible book value per share was $15.30 compared to $15.01 on a linked quarter basis and $14.56 at September 30, 2014. |
| · | During the third quarter of 2015, the Company repurchased 7,589 shares of common stock at an average price per share of $15.76 at a total cost of $120,000. Repurchased shares are held as treasury stock and will be available for general corporate purposes. The Company has 772,745 shares remaining to repurchase at September 30, 2015 from prior regulatory approval. |
| · | At September 30, 2015, 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 23 branch locations throughout central Connecticut and western Massachusetts, offering commercial and residential lending as well as wealth management services. 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, October 22, 2015 at 10:30am Eastern Time to discuss third quarter results. Those wishing to participate in the call may dial-in to the call at 1-888-336-7151. The Canada dial-in number is 1-855-669-9657 and 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.
