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First Connecticut Bancorp, Inc. reports fourth quarter 2016 earnings of $0.27 diluted earnings per share

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FARMINGTON, Conn., Jan. 25, 2017 (GLOBE NEWSWIRE) -- First Connecticut Bancorp, Inc. (NASDAQ: FBNK), the holding company for Farmington Bank, reported a 76% increase in net income of $4.2 million, or $0.27 diluted earnings per share for the quarter ended December 31, 2016 compared to net income of $2.4 million, or $0.16 diluted earnings per share for the quarter ended December 31, 2015.  Net income for the full year was $15.2 million, or $1.00 diluted earnings per share as compared to $12.6 million, or $0.83 diluted earnings per share in the prior year.

"I am pleased to report annual earnings of $1.00 per share supported by strong fourth quarter results of $0.27 per share. This represents the third consecutive year of double digit earnings per share growth for the Company," stated John J. Patrick Jr., First Connecticut Bancorp's Chairman, President and CEO.

"I am also pleased that we continued to grow tangible book value in a meaningful way while remaining diligent with respect to our expenses and process improvement initiatives which will support our future growth."

Financial Highlights

  • Net interest income increased $367,000 to $18.1 million in the fourth quarter of 2016 compared to the linked quarter and increased $759,000 compared to the fourth quarter of 2015.
  • Net interest rate margin was 2.75% in the fourth quarter of 2016 compared to 2.74% in the linked quarter and 2.76% in the prior year quarter.
  • Core noninterest expense to average assets was 2.13% in the fourth quarter of 2016 compared to 2.22% in the linked quarter and 2.37% in the prior year quarter.
  • Organic loan growth remained strong during the fourth quarter of 2016 as loans increased $71.1 million to $2.5 billion at December 31, 2016 and increased $185.7 million or 8% from a year ago.
  • Overall deposits remained at $2.2 billion in the fourth quarter of 2016 compared to the linked quarter and increased $223.7 million or 11% from a year ago.
  • Loans to deposits were 115% in the fourth quarter of 2016 compared to 110% in the linked quarter and 119% in the fourth quarter of 2015.
  • Tangible book value per share increased to $16.37 for the quarter ended December 31, 2016 compared to $16.17 on a linked quarter basis and $15.47 at December 31, 2015.
  • Checking accounts grew by 8% or 4,235 net new accounts from a year ago.
  • Loan delinquencies 30 days and greater represented 0.68% of total loans at December 31, 2016 compared to 0.74% of total loans at September 30, 2016 and 0.63% at December 31, 2015.  Non-accrual loans represented 0.69% of total loans compared to 0.72% of total loans on a linked quarter basis and 0.63% of total loans at December 31, 2015.
  • The allowance for loan losses represented 0.85% of total loans at December 31, 2016 and 0.86% of total loans at September 30, 2016 and at December 31, 2015.
  • The Company paid a quarterly cash dividend of $0.09 per share during the fourth quarter, an increase of $0.01 compared to the linked quarter.

Fourth quarter 2016 compared with third quarter 2016

Net interest income

  • Net interest income increased $367,000 to $18.1 million in the fourth quarter of 2016 compared to the linked quarter primarily due to a $67.8 million increase in the average loans balance.
  • Net interest margin was 2.75% in the fourth quarter of 2016 compared to 2.74% in the linked quarter.
  • The cost of interest-bearing liabilities decreased 2 basis points to 77 basis points in the fourth quarter of 2016 compared to 79 basis points in the linked quarter.

Provision for loan losses

  • Provision for loan losses was $616,000 for the fourth quarter of 2016 compared to $698,000 for the linked quarter.             
  • Net charge-offs in the quarter were $350,000 or 0.06% to average loans (annualized) compared to $155,000 or 0.03% to average loans (annualized) in the linked quarter.
  • The allowance for loan losses represented 0.85% of total loans at December 31, 2016 and 0.86% of total loans at September 30, 2016.

Noninterest income

  • Total noninterest income decreased $149,000 to $3.5 million in the fourth quarter of 2016 compared to the linked quarter primarily due to a $63,000 decrease in fees for customer service and an $87,000 decrease in other noninterest income.
  • Other noninterest income decreased $87,000 primarily due to a $413,000 decrease in swap fees and a $206,000 decrease in banking derivatives offset by a $192,000 increase in the recovery in fair value in mortgage servicing rights, a $203,000 increase in the credit valuation of the commercial swap portfolio and a $73,000 decrease in impairment on a SBIC fund.
  • Other noninterest income includes swap fees totaling $279,000 compared to $692,000 in the linked quarter.

Noninterest expense

  • Noninterest expense decreased $385,000 in the fourth quarter of 2016 to $15.1 million compared to the linked quarter primarily due to a $176,000 decrease in salaries and employee benefits and a $159,000 decrease in marketing expenses.
  • Salaries and employee benefits decreased $176,000 to $9.1 million primarily due to a $350,000 decrease in officers' share-based compensation expense as a result of the majority of the 2012 Stock Incentive Plan fully vesting in September 2016 offset by a general increase in salaries and employee benefits to maintain the Bank's growth.

Income tax expense

  • Income tax expense was $1.8 million in the fourth quarter of 2016 compared to $1.5 million in the linked quarter. Income tax expense in the fourth quarter of 2016 included a $137,000 write-off of a deferred tax asset associated with the establishment of the Bank's foundation in 2011.

Fourth quarter 2016 compared with fourth quarter 2015

Net interest income

  • Net interest income increased $759,000 to $18.1 million in the fourth quarter of 2016 compared to the prior year quarter due primarily to a $151.7 million increase in the average loan balance offset by a $307,000 increase in interest expense.
  • Net interest margin was 2.75% in the fourth quarter of 2016 compared to 2.76% in the prior year quarter.
  • The cost of interest-bearing liabilities increased 4 basis points to 77 basis points in the fourth quarter of 2016 compared to 73 basis points in the prior year quarter due to money market and certificate of deposit promotions.

Provision for loan losses

  • Provision for loan losses was $616,000 for the fourth quarter of 2016 compared to $776,000 for the prior year quarter.
  • Net charge-offs in the quarter were $350,000 or 0.06% to average loans (annualized) compared to $588,000 or 0.10% to average loans (annualized) in the prior year quarter.
  • The allowance for loan losses represented 0.85% of total loans at December 31, 2016 and 0.86% of total loans at December 31, 2015.

Noninterest income

  • Total noninterest income increased $68,000 to $3.5 million in the fourth quarter of 2016 compared to the prior year quarter.
  • Net gain on loans sold increased $358,000 to $925,000 primarily due to an increase in volume and a lower rate environment.
  • Bank owned life insurance income decreased $365,000 to $361,000 in the fourth quarter of 2016 due to the prior year quarter receiving $379,000 in insurance proceeds.
  • Other noninterest income increased $109,000 in the fourth quarter of 2016 compared to the prior year quarter primarily due to a $283,000 recovery in fair value in mortgage servicing rights offset by a $171,000 decrease in mortgage banking derivatives.

Noninterest expense

  • Noninterest expense decreased $859,000 in the fourth quarter of 2016 to $15.1 million compared to the prior year quarter primarily due to a $619,000 decrease in salaries and employee benefits and $240,000 decrease in marketing expenses.
  • Salaries and employee benefits decreased $619,000 to $9.1 million primarily due to a $478,000 decrease in officers' share-based compensation expense as a result of the majority of the 2012 Stock Incentive Plan fully vesting in September 2016.
  • Marketing expense decreased $240,000 primarily due to a decrease in marketing expense related to our expansion into western Massachusetts as compared to the prior year quarter.

Income tax expense

  • Income tax expense was $1.8 million in the fourth quarter of 2016 and $1.7 million in the prior year quarter.  Income tax expense in the fourth quarter of 2016 included a $137,000 write-off of a deferred tax asset associated with the establishment of the Bank's foundation in 2011.  Income tax expense in the fourth quarter of 2015 included a $771,000 valuation allowance also related to a deferred tax asset associated with the establishment of the Bank's foundation in 2011.  In the fourth quarter of 2016, the valuation allowance established in 2015 of $771,000 was reversed and the related deferred tax asset written-off.  This had no impact on income tax expense in 2016.

For the year ended December 31, 2016 compared with the year ended December 31, 2015

Net interest income

  • Net interest income increased $2.7 million or 4% to $71.3 million for the year ended 2016 compared to $68.5 million for the year ended 2015 primarily due to a $141.4 million increase in the average loan balance offset by a $2.4 million increase in interest expense.
  • Net interest margin was 2.80% for the year ended 2016 compared to 2.81% for the year ended 2015.
  • The total interest-earning assets yield increased 5 basis points to 3.39% for the year ended 2016 compared to 3.34% for the year ended 2015 primarily due to an increase in yield on our securities portfolio.
  • The cost of interest-bearing liabilities increased 10 basis points to 78 basis points for the year ended 2016 compared to 68 basis points for the year ended 2015.  The increase was primarily due to money market and certificate of deposit promotions and a 52 basis point increase in the average cost of Federal Home Loan Bank of Boston borrowings.

Provision for loan losses

  • Provision for loan losses was $2.3 million for the year ended 2016 compared to $2.4 million for the year ended 2015.
  • Net charge-offs for the year ended 2016 were $1.0 million or 0.04 % to average loans compared to $1.2 million or 0.05% to average loans for the year ended 2015.
  • The allowance for loan losses represented 0.85% of total loans at December 31, 2016 compared to 0.86% at December 31, 2015.

Noninterest income

  • Total noninterest income decreased $709,000 to $12.7 million for the year ended 2016 compared to $13.4 million for the year ended 2015.
  • Fees for customer services increased $176,000 to $6.2 million for the year ended 2016 compared to the year ended 2015 driven by our growth in checking accounts and debit card fees.
  • There was no gain on sale of investments for the year ended 2016. Gain on sale of investments was $1.5 million for the year ended 2015 due to the sale of trust preferred securities.
  • Net gain on loans sold increased $613,000 to $3.1 million for the year ended 2016 compared to the year ended 2015 as a result of an increase in volume of loans sold and a lower rate environment.
  • Bank owned life insurance income decreased $255,000 to $1.4 million for the year ended 2016 compared to the year ended 2015 primarily due to $302,000 more in bank owned life insurance proceeds in 2015 than in the current year.
  • Other noninterest income increased $282,000 to $1.9 million for the year ended 2016 compared to the year ended 2015 primarily due to a $372,000 increase in swap fee income offset by a $78,000 decrease in mortgage banking derivatives.
  • Other noninterest income includes swap fees totaling $1.6 million compared to $1.2 million in the prior year.

Noninterest expense

  • Noninterest expense decreased $706,000 to $60.5 million for the year ended 2016 compared to $61.2 million for the year ended 2015.
  • Salaries and employee benefits increased $128,000 to $37.0 million for the year ended 2016 compared to the year ended 2015.  The increase is primarily due to increases in employee benefit related costs offset by a $616,000 decrease in officers' share-based compensation expense due to the majority of the 2012 Stock Incentive Plan fully vesting in September 2016.
  • Other operating expenses decreased $454,000 to $10.8 million for the year ended 2016 compared to the prior year primarily due to a $707,000 decrease in directors' share-based compensation expense as a result of the majority of the 2012 Stock Incentive Plan fully vesting in September 2016 and a $436,000 decrease in the provision for off-balance sheet commitments as a result of a change in accounting estimate offset by a $557,000 gain on foreclosed real estate in 2015.

Income tax expense

  • Income tax expense was $5.9 million for the year ended 2016 compared to $5.7 million for the year ended 2015.  Income tax expense in 2016 included a $137,000 write-off of a deferred tax asset associated with the establishment of the Bank's foundation in 2011.  Income tax expense in 2015 included a $771,000 valuation allowance also related to a deferred tax asset associated with the establishment of the Bank's foundation in 2011.  In the fourth quarter of 2016, the valuation allowance established in 2015 of $771,000 was reversed and the related deferred tax asset written-off.  This had no impact on income tax expense in 2016.

December 31, 2016 compared to December 31, 2015

Financial Condition

  • Total assets increased $129.0 million or 5% at December 31, 2016 to $2.8 billion compared to $2.7 billion at December 31, 2015, largely reflecting an increase in net loans.
  • Our investment portfolio totaled $136.6 million at December 31, 2016 compared to $164.7 million at December 31, 2015, a decrease of $28.1 million due to a reduction in collateral requirements.
  • Net loans increased $184.4 million or 8% at December 31, 2016 to $2.5 billion compared to $2.3 billion at December 31, 2015 due to our continued focus on commercial and residential lending.
  • Deposits increased $223.7 million or 11% to $2.2 billion at December 31, 2016 compared to $2.0 billion at December 31, 2015 primarily due to a $197.0 million increase in retail deposits as we continue to develop and grow relationships in the geographical areas we serve.  We had municipal deposit balances totaling $394.5 million and $368.0 million at December 31, 2016 and 2015, respectively.
  • Federal Home Loan Bank of Boston advances decreased $90.5 million to $287.1 million at December 31, 2016 compared to $377.6 million at December 31, 2015.

Asset Quality

  • At December 31, 2016 the allowance for loan losses represented 0.85% of total loans and 122.60% of non-accrual loans, compared to 0.86% of total loans and 119.26% of non-accrual loans at September 30, 2016 and 0.86% of total loans and 135.44% of non-accrual loans at December 31, 2015.
  • Loan delinquencies 30 days and greater represented 0.68% of total loans at December 31, 2016 compared to 0.74% of total loans at September 30, 2016 and 0.63% of total loans at December 31, 2015.
  • Non-accrual loans represented 0.69% of total loans at December 31, 2016 compared to 0.72% of total loans at September 30, 2016 and 0.63% of total loans at December 31, 2015.
  • Net charge-offs in the quarter were $350,000 or 0.06% to average loans (annualized) compared to $155,000 or 0.03% to average loans (annualized) in the linked quarter and $588,000 or 0.10% 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 12.78% at December 31, 2016. 
  • Tangible book value per share is $16.37 compared to $16.17 on a linked quarter basis and $15.47 at December 31, 2015.
  • The Company had 600,945 shares remaining to repurchase at December 31, 2016 from prior regulatory approval. Repurchased shares are held as treasury stock and will be available for general corporate purposes. 
  • At December 31, 2016, 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 and pre-approved unsecured lines of credit.

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 24 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, January 26, 2017 at 10:30am Eastern Time to discuss fourth 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 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.

                     
First Connecticut Bancorp, Inc.  
Selected Financial Data (Unaudited)  
                     
  At or for the Three Months Ended  
  December 31,   September 30,   June 30,   March 31,   December 31,  
(Dollars in thousands, except per share data)   2016       2016       2016       2016       2015    
Selected Financial Condition Data:                    
                     
Total assets $ 2,837,555     $ 2,831,960     $ 2,779,224     $ 2,701,614     $ 2,708,546    
Cash and cash equivalents   47,723       89,940       66,743       59,166       59,139    
Securities held-to-maturity, at amortized cost   33,061       7,338       7,640       19,964       32,246    
Securities available-for-sale, at fair value   103,520       134,094       149,396       128,681       132,424    
Federal Home Loan Bank of Boston stock, at cost   16,378       15,139       18,240       15,688       21,729    
Loans, net   2,525,983       2,455,101       2,403,420       2,350,245       2,341,598    
Deposits   2,215,090       2,247,873       2,051,438       2,097,832       1,991,358    
Federal Home Loan Bank of Boston advances   287,057       220,600       340,600       259,600       377,600    
Total stockholders' equity   260,176       255,615       252,242       248,013       245,721    
Allowance for loan losses   21,529       21,263       20,720       20,174       20,198    
Non-accrual loans   17,561       17,829       13,523       13,093       14,913    
Impaired loans   34,273       37,599       38,216       38,588       41,017    
Loan delinquencies 30 days and greater   17,271       18,238       12,206       13,095       14,945    
                     
Selected Operating Data:                    
                     
Interest income $ 22,160     $ 21,805     $ 21,698     $ 21,323     $ 21,094    
Interest expense   4,038       4,050       3,826       3,817       3,731    
Net interest income   18,122       17,755       17,872       17,506       17,363    
Provision for loan losses   616       698       801       217       776    
Net interest income after provision for loan losses   17,506       17,057       17,071       17,289       16,587    
Noninterest income   3,536       3,685       2,617       2,900       3,468    
Noninterest expense   15,099       15,484       14,644       15,277       15,958    
Income before income taxes   5,943       5,258       5,044       4,912       4,097    
Income tax expense   1,757       1,485       1,401       1,299       1,716    
                     
Net income $ 4,186     $ 3,773     $ 3,643     $ 3,613     $ 2,381    
                     
Performance Ratios (annualized):                    
                     
Return on average assets   0.59 %     0.54 %     0.54 %     0.54 %     0.35 %  
Return on average equity   6.43 %     5.89 %     5.77 %     5.82 %     3.86 %  
Net interest rate spread (1)   2.57 %     2.56 %     2.70 %     2.65 %     2.61 %  
Net interest rate margin (2)   2.75 %     2.74 %     2.87 %     2.82 %     2.76 %  
Non-interest expense to average assets (3)   2.13 %     2.22 %     2.23 %     2.27 %     2.37 %  
Efficiency ratio (4)   70.64 %     72.53 %     73.52 %     75.19 %     78.19 %  
Average interest-earning assets to average                    
interest-bearing liabilities   130.20 %     129.42 %     129.54 %     128.45 %     127.48 %  
Loans to deposits   115 %     110 %     118 %     113 %     119 %  
                     
Asset Quality Ratios:                    
                     
Allowance for loan losses as a percent of total loans   0.85 %     0.86 %     0.86 %     0.85 %     0.86 %  
Allowance for loan losses as a percent of                    
non-accrual loans   122.60 %     119.26 %     153.22 %     154.08 %     135.44 %  
Net charge-offs (recoveries) to average loans (annualized)   0.06 %     0.03 %     0.04 %     0.04 %     0.10 %  
Non-accrual loans as a percent of total loans   0.69 %     0.72 %     0.56 %     0.55 %     0.63 %  
Non-accrual loans as a percent of total assets   0.62 %     0.63 %     0.49 %     0.48 %     0.55 %  
Loan delinquencies 30 days and greater as a                    
percent of total loans   0.68 %     0.74 %     0.50 %     0.55 %     0.63 %  
                     
Per Share Related Data:                    
                     
Basic earnings per share $ 0.28     $ 0.25     $ 0.24     $ 0.24     $ 0.16    
Diluted earnings per share $ 0.27     $ 0.25     $ 0.24     $ 0.24     $ 0.16    
Dividends declared per share $ 0.09     $ 0.08     $ 0.07     $ 0.07     $ 0.06    
Tangible book value (5) $ 16.37     $ 16.17     $ 15.95     $ 15.72     $ 15.47    
Common stock shares outstanding   15,897,698       15,805,748       15,818,494       15,780,657       15,881,663    
Weighted-average basic shares outstanding   14,973,610       14,823,914       14,765,452       14,720,892       14,785,058    
Weighted-average diluted shares outstanding   15,502,481       15,192,006       15,077,291       15,012,540       15,146,365    
                     
                     
(1) Represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities on a tax-equivalent basis.  
                     
(2) Represents tax-equivalent net interest income as a percent of average interest-earning assets.              
                     
(3) Represents core noninterest expense annualized divided by average assets.  See "Reconciliation of Non-GAAP Financial Measures" table.      
                     
(4) Represents core noninterest expense divided by the sum of core net interest income and core noninterest income.          
See "Reconciliation of Non-GAAP Financial Measures" table.                    
                     
(5) Represents ending stockholders' equity less goodwill and intangible assets (excluding mortgage servicing rights) divided by ending common shares outstanding.  
The Company does not have goodwill and intangible assets for any of the periods presented.  See "Reconciliation of Non-GAAP Financial Measures" table.  


First Connecticut Bancorp, Inc.  
Selected Financial Data (Unaudited)  
                     
  At or for the Three Months Ended  
  December 31,   September 30,   June 30,   March 31,   December 31,  
(Dollars in thousands)   2016       2016       2016       2016       2015    
Capital Ratios:                    
                     
Equity to total assets at end of period   9.17 %     9.03 %     9.08 %     9.18 %     9.07 %  
Average equity to average assets   9.18 %     9.20 %     9.34 %     9.22 %     9.17 %  
Total Capital (to Risk Weighted Assets)   12.78 % *   12.57 %     12.63 %     12.88 %     12.88 %  
Tier I Capital (to Risk Weighted Assets)   11.82 % *   11.62 %     11.69 %     11.92 %     11.91 %  
Common Equity Tier I Capital   11.82 % *   11.62 %     11.69 %     11.92 %     11.91 %  
Tier I Leverage Capital (to Average Assets)   9.41 % *   9.40 %     9.55 %     9.44 %     9.39 %  
Total equity to total average assets   9.18 %     9.17 %     9.32 %     9.20 %     9.13 %  
                     
* Estimated                    
                     
Loans and Allowance for Loan Losses:                    
                     
Real estate                    
Residential $ 907,946     $ 864,054     $ 842,427     $ 855,148     $ 849,722    
Commercial   979,370       931,703       922,643       893,477       887,431    
Construction   49,679       50,083       41,466       36,557       30,895    
Installment   3,174       3,211       3,267       3,338       2,970    
Commercial   430,539       449,008       437,046       402,960       409,550    
Collateral   1,614       1,621       1,689       1,668       1,668    
Home equity line of credit   170,786       172,148       171,212       172,325       174,701    
Revolving credit   72       82       79       77       91    
Resort   488       512       535       759       784    
Total loans   2,543,668       2,472,422       2,420,364       2,366,309       2,357,812    
Net deferred loan costs   3,844       3,942       3,776       4,110       3,984    
Loans   2,547,512       2,476,364       2,424,140       2,370,419       2,361,796    
Allowance for loan losses   (21,529 )     (21,263 )     (20,720 )     (20,174 )     (20,198 )  
Loans, net $ 2,525,983     $ 2,455,101     $ 2,403,420     $ 2,350,245     $ 2,341,598    
                     
Deposits:                    
                     
Noninterest-bearing demand deposits $ 441,283     $ 419,664     $ 415,562     $ 396,356     $ 401,388    
Interest-bearing                    
NOW accounts   542,764       590,213       429,973       529,267       468,054    
Money market   532,681       536,979       498,847       488,497       460,737    
Savings accounts   233,792       223,848       229,868       223,188       220,389    
Time deposits   464,570       477,169       477,188       460,524       440,790    
Total interest-bearing deposits   1,773,807       1,828,209       1,635,876       1,701,476       1,589,970    
Total deposits $ 2,215,090     $ 2,247,873     $ 2,051,438     $ 2,097,832     $ 1,991,358    


First Connecticut Bancorp, Inc.  
Consolidated Statements of Condition (Unaudited)  
               
    December 31,   September 30,   December 31,  
      2016       2016       2015    
(Dollars in thousands)            
               
Cash and due from banks $ 44,086     $ 33,206     $ 45,732    
Interest bearing deposits with other institutions   3,637       56,734       13,407    
Total cash and cash equivalents   47,723       89,940       59,139    
Securities held-to-maturity, at amortized cost   33,061       7,338       32,246    
Securities available-for-sale, at fair value   103,520       134,094       132,424    
Loans held for sale   3,270       5,462       9,637    
Loans (1)     2,547,512       2,476,364       2,361,796    
Allowance for loan losses   (21,529 )     (21,263 )     (20,198 )  
Loans, net   2,525,983       2,455,101       2,341,598    
Premises and equipment, net   18,002       18,383       18,565    
Federal Home Loan Bank of Boston stock, at cost   16,378       15,139       21,729    
Accrued income receivable   7,432       6,413       6,747    
Bank-owned life insurance   51,726       51,364       50,618    
Deferred income taxes   14,795       15,136       15,443    
Prepaid expenses and other assets   15,665       33,590       20,400    
Total assets $ 2,837,555     $ 2,831,960     $ 2,708,546    
               
Liabilities and Stockholders' Equity            
Deposits              
Interest-bearing $ 1,773,807     $ 1,828,209     $ 1,589,970    
Noninterest-bearing   441,283       419,664       401,388    
      2,215,090       2,247,873       1,991,358    
Federal Home Loan Bank of Boston advances   287,057       220,600       377,600    
Repurchase agreement borrowings   10,500       10,500       10,500    
Repurchase liabilities   18,867       35,036       35,769    
Accrued expenses and other liabilities   45,865       62,336       47,598    
Total liabilities   2,577,379       2,576,345       2,462,825    
               
Stockholders' Equity            
Common stock   181       181       181    
Additional paid-in-capital   184,111       183,769       181,997    
Unallocated common stock held by ESOP   (10,567 )     (10,833 )     (11,626 )  
Treasury stock, at cost   (30,400 )     (31,645 )     (30,602 )  
Retained earnings   123,541       120,487       112,933    
Accumulated other comprehensive loss   (6,690 )     (6,344 )     (7,162 )  
Total stockholders' equity   260,176       255,615       245,721    
Total liabilities and stockholders' equity $ 2,837,555     $ 2,831,960     $ 2,708,546    
               
(1) Loans include net deferred fees and unamortized premiums of $3.8 million, $3.9 million and $4.0 million at December 31, 2016, September 30, 2016 and December 31, 2015, respectively.  


  First Connecticut Bancorp, Inc.    
  Consolidated Statements of Income (Unaudited)    
                                   
              Three Months Ended   For The Year Ended    
              December 31,   September 30,   December 31,   December 31,    
(Dollars in thousands, except per share data)   2016     2016     2015     2016     2015    
Interest income                      
Interest and fees on loans                      
  Mortgage   $ 16,451   $ 16,134   $ 15,670   $ 64,612   $ 61,920    
  Other       5,058     4,983     4,731     19,613     17,584    
Interest and dividends on investments                      
  United States Government and agency obligations   335     419     425     1,620     1,534    
  Other bonds   10     13     13     50     79    
  Corporate stocks   231     210     248     912     741    
Other interest income   75     46     7     179     26    
  Total interest income   22,160     21,805     21,094     86,986     81,884    
Interest expense                      
Deposits       3,010     2,975     2,611     11,456     9,372    
Interest on borrowed funds   924     955     1,004     3,826     3,449    
Interest on repo borrowings   96     98     97     385     448    
Interest on repurchase liabilities   8     22     19     64     106    
  Total interest expense   4,038     4,050     3,731     15,731     13,375    
  Net interest income   18,122     17,755     17,363     71,255     68,509    
Provision for loan losses   616     698     776     2,332     2,440    
  Net interest income                      
  after provision for loan losses   17,506     17,057     16,587     68,923     66,069    
Noninterest income                      
Fees for customer services   1,537     1,600     1,566     6,151     5,975    
Gain on sale of investments   -     -     -     -     1,523    
Net gain on loans sold   925     939     567     3,105     2,492    
Brokerage and insurance fee income   47     58     52     213     215    
Bank owned life insurance income   361     335     726     1,417     1,672    
Other         666     753     557     1,852     1,570    
  Total noninterest income   3,536     3,685     3,468     12,738     13,447    
Noninterest expense                      
Salaries and employee benefits   9,109     9,285     9,728     36,983     36,855    
Occupancy expense   1,211     1,271     1,257     4,890     5,115    
Furniture and equipment expense   983     1,020     1,057     4,082     4,204    
FDIC assessment   424     392     430     1,603     1,657    
Marketing     523     682     763     2,170     2,149    
Other operating expenses   2,849     2,834     2,723     10,776     11,230    
  Total noninterest expense   15,099     15,484     15,958     60,504     61,210    
  Income before income taxes   5,943     5,258     4,097     21,157     18,306    
Income tax expense   1,757     1,485     1,716     5,942     5,727    
  Net income $ 4,186   $ 3,773   $ 2,381   $ 15,215   $ 12,579    
                                   
Earnings per share:                      
  Basic     $ 0.28   $ 0.25   $ 0.16   $ 1.02   $ 0.84    
  Diluted       0.27     0.25     0.16     1.00     0.83    
Weighted average shares outstanding:                      
  Basic       14,973,610     14,823,914     14,785,058     14,821,391     14,726,607    
  Diluted       15,502,481     15,192,006     15,146,365     15,196,011     14,949,654    


First Connecticut Bancorp, Inc.    
Consolidated Average Balances, Yields and Rates (Unaudited)    
                           
                           
  For The Three Months Ended    
  December 31, 2016   September 30, 2016   December 31, 2015    
  Average Balance Interest and Dividends (1) Yield/Cost   Average Balance Interest and Dividends (1) Yield/Cost   Average Balance Interest and Dividends (1) Yield/Cost    
(Dollars in thousands)                          
Interest-earning assets:                          
Loans $ 2,497,897 $ 22,092   3.52 %   $ 2,430,114 $ 21,650   3.54 %   $ 2,346,218 $ 20,916   3.54 %    
Securities   131,837   402   1.21 %     165,738   481   1.15 %     185,697   495   1.06 %    
Federal Home Loan Bank of Boston stock   15,200   174   4.55 %     18,206   161   3.52 %     21,729   191   3.49 %    
Federal funds and other earning assets   60,518   75   0.49 %     36,439   46   0.50 %     14,258   7   0.19 %    
Total interest-earning assets   2,705,452   22,743   3.34 %     2,650,497   22,338   3.35 %     2,567,902   21,609   3.34 %    
Noninterest-earning assets   128,332         135,828         122,500        
Total assets $ 2,833,784       $ 2,786,325       $ 2,690,402        
                           
Interest-bearing liabilities:                          
NOW accounts $ 552,444 $ 443   0.32 %   $ 506,509 $ 385   0.30 %   $ 498,658 $ 363   0.29 %    
Money market   557,864   1,109   0.79 %     525,301   1,085   0.82 %     459,047   957   0.83 %    
Savings accounts   229,052   64   0.11 %     221,981   60   0.11 %     216,219   54   0.10 %    
Certificates of deposit   471,023   1,394   1.18 %     481,901   1,445   1.19 %     436,676   1,237   1.12 %    
Total interest-bearing deposits   1,810,383   3,010   0.66 %     1,735,692   2,975   0.68 %     1,610,600   2,611   0.64 %    
Federal Home Loan Bank of Boston Advances   226,766   924   1.62 %     250,459   955   1.52 %     343,024   1,004   1.16 %    
Repurchase agreement borrowings   10,500   96   3.64 %     10,500   98   3.71 %     10,500   97   3.67 %    
Repurchase liabilities   30,245   8   0.11 %     51,297   22   0.17 %     50,264   19   0.15 %    
Total interest-bearing liabilities   2,077,894   4,038   0.77 %     2,047,948   4,050   0.79 %     2,014,388   3,731   0.73 %    
Noninterest-bearing deposits   434,659         417,917         380,041        
Other noninterest-bearing liabilities   61,023         64,201         49,273        
Total liabilities   2,573,576         2,530,066         2,443,702        
Stockholders' equity   260,208         256,259         246,700        
Total liabilities and stockholders' equity $ 2,833,784       $ 2,786,325       $ 2,690,402        
                           
Tax-equivalent net interest income   $ 18,705         $ 18,288         $ 17,878        
Less: tax-equivalent adjustment     (583 )         (533 )         (515 )      
Net interest income   $ 18,122         $ 17,755         $ 17,363        
                           
Net interest rate spread (2)     2.57 %       2.56 %       2.61 %    
Net interest-earning assets (3) $ 627,558       $ 602,549       $ 553,514        
Net interest margin (4)     2.75 %       2.74 %       2.76 %    
Average interest-earning assets to average interest-bearing liabilities                          
  130.20 %     129.42 %     127.48 %    
                           
(1) On a fully-tax equivalent basis.
   
(2) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities on a tax-equivalent basis.
   
(3) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
   
(4) Net interest margin represents tax-equivalent net interest income divided by average total interest-earning assets.
   


First Connecticut Bancorp, Inc.    
Consolidated Average Balances, Yields and Rates (Unaudited)    
                   
                   
  For The Years Ended December 31,    
    2016       2015      
  Average Balance Interest and Dividends (1) Yield/Cost   Average Balance Interest and Dividends (1) Yield/Cost    
(Dollars in thousands)                  
Interest-earning assets:                  
Loans $ 2,420,859 $ 86,374   3.57 %   $ 2,279,418 $ 81,177   3.56 %    
Securities   150,582   1,881   1.25 %     188,004   1,832   0.97 %    
Federal Home Loan Bank of Boston stock   17,738   701   3.95 %     21,187   522   2.46 %    
Federal funds and other earning assets   36,679   179   0.49 %     11,947   26   0.22 %    
Total interest-earning assets   2,625,858   89,135   3.39 %     2,500,556   83,557   3.34 %    
Noninterest-earning assets   129,826         119,857        
Total assets $ 2,755,684       $ 2,620,413        
                   
Interest-bearing liabilities:                  
NOW accounts $ 513,256 $ 1,544   0.30 %   $ 472,644 $ 1,351   0.29 %    
Money market   512,396   4,119   0.87 %     453,017   3,592   0.79 %    
Savings accounts   223,499   241   0.11 %     213,383   226   0.11 %    
Certificates of deposit   469,493   5,552   1.18 %     407,071   4,203   1.03 %    
Total interest-bearing deposits   1,718,644   11,456   0.67 %     1,546,115   9,372   0.61 %    
Federal Home Loan Bank of Boston Advances   257,281   3,826   1.49 %     356,539   3,449   0.97 %    
Repurchase agreement borrowings   10,500   385   3.67 %     12,629   448   3.55 %    
Repurchase liabilities   42,700   64   0.15 %     54,600   106   0.19 %    
Total interest-bearing liabilities   2,029,125   15,731   0.78 %     1,969,883   13,375   0.68 %    
Noninterest-bearing deposits   412,155         357,156        
Other noninterest-bearing liabilities   60,008         51,312        
Total liabilities   2,501,288         2,378,351        
Stockholders' equity   254,396         242,062        
Total liabilities and stockholders' equity $ 2,755,684       $ 2,620,413        
                   
Tax-equivalent net interest income   $ 73,404         $ 70,182        
Less: tax-equivalent adjustment     (2,149 )         (1,673 )      
Net interest income   $ 71,255         $ 68,509        
                   
Net interest rate spread (2)     2.61 %       2.66 %    
Net interest-earning assets (3) $ 596,733       $ 530,673        
Net interest margin (4)     2.80 %       2.81 %    
Average interest-earning assets to average interest-bearing liabilities                  
  129.41 %       126.94 %      
               
(1) On a fully-tax equivalent basis.
   
(2) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities on a tax-equivalent basis.  
(3) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
   
(4) Net interest margin represents tax-equivalent net interest income divided by average total interest-earning assets.    


  First Connecticut Bancorp, Inc.  
  Reconciliation of Non-GAAP Financial Measures (Unaudited)  
                       
  The table below presents a reconciliation of non-GAAP financial measures with financial measures defined by GAAP for the three months ended December 31, 2016, September 30, 2016, June 30, 2016, March 31, 2016 and December 31, 2015.  The Company believes the use of these non-GAAP financial measures provides additional clarity in assessing the results of the Company.  
                       
    At or for the Three Months Ended  
    December 31,   September 30,   June 30,   March 31,   December 31,  
(Dollars in thousands, except per share data)   2016       2016       2016       2016       2015    
Net Income $ 4,186     $ 3,773     $ 3,643     $ 3,613     $ 2,381    
  Adjustments:                    
  Plus: Mortgage servicing rights (recovery) impairment   (283 )     (91 )     374       -       -    
  Less: Prepayment penalty fees   -       -       (370 )     (10 )     (43 )  
  Less: Off-balance sheet commitments change in accounting estimate   -       -       (423 )     -       -    
  Less: Bank-owned life insurance proceeds   -       -       -       (77 )     (379 )  
Total core adjustments before taxes   (283 )     (91 )     (419 )     (87 )     (422 )  
  Tax benefit on core adjustments   99       32       147       4       15    
  Deferred tax asset write-off (1)   137       -       -       -       -    
  Deferred tax asset valuation allowance (2)   -       -       -       -       771    
Total core adjustments after taxes   (47 )     (59 )     (272 )     (83 )     364    
Total core net income $ 4,139     $ 3,714     $ 3,371     $ 3,530     $ 2,745    
                       
                       
Total net interest income $ 18,122     $ 17,755     $ 17,872     $ 17,506     $ 17,363    
  Less: Prepayment penalty fees   -       -       (370 )     (10 )     (43 )  
Total core net interest income $ 18,122     $ 17,755     $ 17,502     $ 17,496     $ 17,320    
                       
Total noninterest income $ 3,536     $ 3,685     $ 2,617     $ 2,900     $ 3,468    
  Plus: Mortgage servicing rights (recovery) impairment   (283 )     (91 )     374       -       -    
  Less: Bank-owned life insurance proceeds   -       -       -       (77 )     (379 )  
Total core noninterest income $ 3,253     $ 3,594     $ 2,991     $ 2,823     $ 3,089    
                       
Total noninterest expense $ 15,099     $ 15,484     $ 14,644     $ 15,277     $ 15,958    
  Plus: Off-balance sheet commitments change in accounting estimate   -       -       423       -       -    
Total core noninterest expense $ 15,099     $ 15,484     $ 15,067     $ 15,277     $ 15,958    
                       
Core earnings per common share, diluted $ 0.27     $ 0.24     $ 0.22     $ 0.23     $ 0.18    
                       
Core net interest rate margin (3)    2.75 %     2.74 %     2.81 %     2.82 %     2.76 %  
Core return on average assets (annualized)   0.58 %     0.53 %     0.50 %     0.52 %     0.41 %  
Core return on average equity (annualized)   6.36 %     5.80 %     5.34 %     5.68 %     4.45 %  
Core non-interest expense to average assets (annualized)   2.13 %     2.22 %     2.23 %     2.27 %     2.37 %  
Efficiency ratio (4)    70.64 %     72.53 %     73.52 %     75.19 %     78.19 %  
                       
Tangible book value (5)  $ 16.37     $ 16.17     $ 15.95     $ 15.72     $ 15.47    
                       
                       
(1) Represents a write-off of the remaining deferred tax asset associated with the establishment of the Bank's foundation in 2011.
 
                       
(2) Represents a valuation allowance related to a deferred tax asset associated with the establishment of the Bank's foundation in 2011.
 
                       
(3) Represents tax-equivalent core net interest income as a percent of average interest-earning assets.
 
                       
(4) Represents core noninterest expense divided by the sum of core net interest income and core noninterest income.
 
                       
(5) Represents ending stockholders' equity less goodwill and intangible assets (excluding mortgage servicing rights) divided by ending common shares outstanding.
 
The Company does not have goodwill and intangible assets for any of the periods presented.
 


  First Connecticut Bancorp, Inc.        
  Reconciliation of Non-GAAP Financial Measures (Unaudited)        
                 
  The table below presents a reconciliation of non-GAAP financial measures with financial measures defined by GAAP for the years ended December 31, 2016 and 2015.  The Company believes the use of these non-GAAP financial measures provides additional clarity in assessing the results of the Company.        
                 
    At or for the Year Ended December 31,        
(Dollars in thousands, except per share data)   2016       2015          
Net Income $ 15,215     $ 12,579          
  Adjustments:              
  Plus: Accelerated vesting of stock compensation   -       398          
  Plus: Employee severance   -       93          
  Less: Prepayment penalty fees   (380 )     (78 )        
  Less:  Off-balance sheet commitment change in accounting estimate   (423 )            
  Less: Bank-owned life insurance proceeds   (77 )     (379 )        
  Less: Gain on sale of foreclosed real estate   -       (557 )        
  Less: Net gain on sales of investments   -       (1,523 )        
Total core adjustments before taxes   (880 )     (2,046 )        
  Tax benefit on core adjustments   282       583          
  Deferred tax asset write-off (1)   137       -          
  Deferred tax asset valuation allowance (2)   -       771          
Total core adjustments after taxes   (461 )     (692 )        
Total core net income $ 14,754     $ 11,887          
                 
                 
Total net interest income $ 71,255     $ 68,509          
  Less: Prepayment penalty fees   (380 )     (78 )        
Total core net interest income $ 70,875     $ 68,431          
                 
Total noninterest income $ 12,738     $ 13,447          
  Less: Bank-owned life insurance proceeds   (77 )     (379 )        
  Less: Net gain on sales of investments   -       (1,523 )        
Total core noninterest income $ 12,661     $ 11,545          
                 
Total noninterest expense $ 60,504     $ 61,210          
  Plus: Off-balance sheet commitments change in accounting estimate   423       -          
  Less: Accelerated vesting of stock compensation   -       (398 )        
  Less: Employee severances   -       (93 )        
  Less: Gain on sale of foreclosed real estate   -       557          
Total core noninterest expense $ 60,927     $ 61,276          
                 
Core earnings per common share, diluted $ 0.97     $ 0.78          
                 
Core net interest rate margin (3)    2.81 %     2.80 %        
Core return on average assets (annualized)   0.54 %     0.45 %        
Core return on average equity (annualized)   5.80 %     4.91 %        
Core non-interest expense to average assets (annualized)   2.21 %     2.34 %        
Efficiency ratio (4)    72.94 %     76.62 %        
                 
Tangible book value (5)  $ 16.37     $ 15.47          
                 
(1) Represents a write-off of the remaining deferred tax asset associated with the establishment of the Bank's foundation in 2011.        
                 
(2) Represents a valuation allowance related to a deferred tax asset associated with the establishment of the Bank's foundation in 2011.      
                 
(3) Represents tax-equivalent core net interest income as a percent of average interest-earning assets.
       
                 
(4) Represents core noninterest expense divided by the sum of core net interest income and core noninterest income.        
                 
(5) Represents ending stockholders' equity less goodwill and intangible assets (excluding mortgage servicing rights) divided by ending common shares outstanding.  
The Company does not have goodwill and intangible assets for any of the periods presented.            

Jennifer H. Daukas
Investor Relations Officer 
One Farm Glen Boulevard, Farmington, CT 06032 
P 860-284-6359
F 860-409-3316 
jdaukas@farmingtonbankct.com

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