Exhibit 99.1
News Release
First Litchfield Financial Corporation Announces First Quarter Earnings
Litchfield, Connecticut, May 10, 2006 -- First Litchfield Financial Corporation
(NASDQ: FLFL) (The "Company") the holding company for The First National Bank of
Litchfield (the "Bank") reported earnings for the first quarter of 2006. Net
income for the first quarter of 2006 totaled $623,000. These earnings are
$435,000 or 41% below earnings for the first quarter of 2005, which totaled
$1,058,000. Basic and diluted income per share for the first quarter of 2006
were $.29, compared to basic and diluted income per share of $.50 and $.49,
respectively, earned for the first quarter of 2005. For the first quarter of
2006, the return on average equity for the Company totaled 9.6% compared to
17.1% earned for the first quarter of 2005. The decrease in net income resulted
from pressures in net interest margin and increased noninterest expense due to
branch expansion activities.
Tax-equivalent net interest income for the first quarter of 2006 totaled
$3,434,000, a decrease of $278,000 or 7.5% from the first quarter of 2005. The
lower level of net interest income is due to the erosion of net interest spread,
which decreased by 66 basis points from the first quarter of 2005. Higher short
term rates increased overall funding costs. Specifically, the cost of interest
bearing deposits for the first quarter of 2006 was 2.02%, up 75 basis points
compared to the first quarter 2005 cost of 1.27%. The continued flattening of
the yield curve however, resulted in less than a comparable increase in interest
income. Because most of the Company's assets are of a long term nature and rates
on products such as mortgages and mortgage-backed securities remained flat,
earning assets increased by only 35 basis points over the year.
Growth in earning assets, in both loans and investment securities, offset some
of the decline in net interest income. Average earning assets for the first
quarter of 2006 totaled $435 million, $31 million or 8% greater than average
earning assets for the first quarter of 2005 which totaled $404 million. Growth
in construction loans and in mortgage lending resulted in the increased level of
earning assets. This growth is the result of the popularity of the construction
to permanent mortgage product, a streamlined application process and the
addition of mortgage originators for the Bank.
Noninterest income for the first quarter of 2006 totaled $667,000, increasing 9%
from the first quarter 2005 income of $614,000 as a result of increased income
from Trust fees and banking service charges. Trust income increased 14% as a
result of an increased volume of investments under management. The Bank's Trust
department continues to be an attractive option for high net worth individuals
in Connecticut's Northwest corner and Farmington Valley. Income from banking
service charges and fees increased by 20% from the first quarter of 2005 due to
higher levels of deposit overdraft charges, master money interchange fees, loan
referral fees, and increased income from the Bank's cash management product.
First quarter 2006 noninterest expense totaled $3,096,000, increasing 16% or
$432,000 from the first quarter 2005 expense. Much of this increase is related
to the Bank's Canton, Connecticut branch which opened during the first quarter
of 2006. Increased costs for staffing, occupancy, equipment and marketing were
due to the new branch. Increases in maintenance and utility
costs, and external computer services and consulting, also contributed to the
increase in noninterest expense. Increases in these expenses were mostly related
to the growth of the Company and product offerings.
Recently, the Bank received approval to open a full service banking facility in
the town of New Milford, Connecticut. The Bank's ninth branch is scheduled for a
July 2006 opening. Joseph J. Greco, President and CEO stated "In light of all
the recent changes to the local banking landscape, we believe our high touch
approach, partnered with the most competitive products and services in the
market, is just what New Milford residents and businesses are looking for. For
our shareholders we believe this represents a unique opportunity to expand our
franchise and increase shareholder value."
The First National Bank of Litchfield is a community bank operating full service
banking offices in Canton, Goshen, Litchfield, Marble Dale, Roxbury, Washington
and Torrington. The bank maintains a trust department which offers fiduciary and
wealth management services for personal, business and nonprofit customers.
Additionally, the bank offers non-deposit retail investment products such as
mutual funds, annuities, and insurance through its relationship with Infinex
Investments, Inc. As one of the oldest banks in the country, it has served the
communities of Northwestern Connecticut since 1814.
Contact Person: Carroll A. Pereira, CFO, (860) 567-2674
(Selected financial data follows)
First Litchfield Financial Corporation
Selected Consolidated Financial Data
(Unaudited)
Period end balance sheet data: March 31,
2006 2005
Total Assets $460,843,000 $430,591,000
Loans, net 244,879,000 225,645,000
Investments 178,844,000 169,199,000
Deposits 277,541,000 299,192,000
Borrowings 155,749,000 105,424,000
Stockholders' equity 25,053,000 23,829,000
Book value per share 11.73 11.19
Tangible book value per share 11.73 11.19
Leverage ratio 7.73% 7.72%
Shares outstanding 2,136,370 2,128,659
For the Three Months
Ended March 31,
2006 2005
Operating results:
Net interest income $3,262,000 $3,616,000
Other noninterest income 667,000 614,000
Loan loss provision 105,000 101,000
Other operating expense 3,096,000 2,664,000
Income before tax 728,000 1,465,000
Income tax expense 105,000 408,000
Net income 623,000 1,058,000
Earnings per share(basic) .29 .50
Return on average assets .54% .98%
Return on average equity 9.61% 17.06%
Statements contained in this news release contain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements are based on the beliefs and expectations of management as well
as the assumption made using information currently available to management.
Because these statements reflect the views of management concerning future
events, these statements involve risks, uncertainties and assumptions,
including, among others: changes in market interest rates and general and
regional economic conditions; changes in government regulations; changes in
accounting principles; and the quality or composition of the loan investment
portfolios and other factors that may be described in the Company's quarterly
reports on Form 10-Q and its annual report on Form 10-K, each filed with the
Securities and Exchange Commission, which are available at the Securities and
Exchange Commission's internet website (www.sec.gov) and to which reference is
hereby made. Therefore, actual future results may differ significantly from
results discussed in the forward-looking statements.
###