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First Connecticut Bancorp, Inc. reports first quarter 2018 net income of $6.0 million or $0.38 diluted earnings per share

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FARMINGTON, Conn., April 18, 2018 (GLOBE NEWSWIRE) -- First Connecticut Bancorp, Inc. (NASDAQ:FBNK), the holding company for Farmington Bank, reported a 18% increase in net income of $6.0 million or $0.38 diluted earnings per share for the quarter ended March 31, 2018 compared to net income of $5.1 million or $0.32 diluted earnings per share for the quarter ended March 31, 2017. 

"I am pleased to report solid earnings for the first quarter. Compared to the first quarter a year ago our return on average assets, return on average equity and efficiency ratio continue to improve. During the quarter I am also pleased to report we opened our 25th branch office in Manchester, Connecticut," stated John J. Patrick Jr., First Connecticut Bancorp's Chairman, President and CEO.

Financial Highlights

  • Net interest income increased $394,000 to $20.9 million in the first quarter of 2018 compared to the linked quarter and increased $1.7 million compared to the first quarter of 2017.
  • Organic loan growth remained strong during the first quarter of 2018 as loans increased $68.7 million to $2.8 billion at March 31, 2018 primarily due to a $69.8 million increase in residential real estate loans.  Loans increased $209.9 million or 8% from a year ago. 
  • Asset quality remained strong as loan delinquencies 30 days and greater represented 0.46% of total loans at March 31, 2018 compared to 0.63% of total loans at December 31, 2017 and 0.67% of total loans at March 31, 2017.  Non-accrual loans represented 0.46% of total loans at March 31, 2018 compared to 0.58% of total loans at December 31, 2017 and 0.61% of total loans at March 31, 2017. 
  • Overall deposits increased $9.3 million to $2.4 billion in the first quarter of 2018 compared to the linked quarter and increased $155.5 million or 7% from a year ago.
  • Loans to deposits ratio was 115% for the quarter ended March 31, 2018 compared to 113% in the linked quarter and 114% in the first quarter of 2017.
  • Checking accounts grew by 7% or 3,976 net new accounts from a year ago.
  • Net interest margin was 2.90% in the first quarter of 2018 compared to 2.91% in the linked quarter and 2.94% in the prior year quarter.
  • Efficiency ratio was 67.54% in the first quarter of 2018 compared to 65.06% in the linked quarter and 67.85% in the prior year quarter.
  • Noninterest expense to average assets was 2.10% in the first quarter of 2018 compared to 2.05% in the linked quarter and 2.12% in the prior year quarter.
  • Tangible book value per share was $17.32 for the quarter ended March 31, 2018 compared to $17.08 on a linked quarter basis and $16.62 at March 31, 2017.
  • The allowance for loan losses represented 0.80% of total loans at March 31, 2018 compared to 0.82% of total loans at December 31, 2017 and 0.82% at March 31, 2017. 
  • The Company paid a quarterly cash dividend of $0.16 per share during the first quarter, an increase of $0.01 compared to the linked quarter and an increase of $0.05 from a year ago.

First quarter 2018 compared with fourth quarter 2017

Net interest income

  • Net interest income increased $394,000 to $20.9 million in the first quarter of 2018 compared to the linked quarter primarily due to a $58.0 million increase in the average loans balance and a 7 basis point increase in the loan yield to 3.76% offset by a $518,000 increase in interest expense.
  • Net interest margin was 2.90% in the first quarter of 2018 compared to 2.91% in the linked quarter. The Tax Cuts and Jobs Act (the "Tax Act") negatively affected the net interest margin by 4 basis points on a tax-equivalent basis in the first quarter of 2018. 
  • The cost of interest-bearing liabilities increased 8 basis points to 97 basis points in the first quarter of 2018 compared to 89 basis points in the linked quarter.

Provision for loan losses

  • Provision for loan losses was $465,000 for the first quarter of 2018 compared to $299,000 for the linked quarter. 
  • Net charge-offs in the quarter were $293,000 or 0.04% to average loans (annualized) compared to $53,000 or 0.01% to average loans (annualized) in the linked quarter.
  • The allowance for loan losses represented 0.80% of total loans at March 31, 2018 and 0.82% of total loans at December 31, 2017. 

Noninterest income

  • Total noninterest income was $3.1 million in the first quarter of 2018 compared to $3.2 million in the linked quarter.
  • Net gain on loans sold decreased to $288,000 from $598,000 primarily due to a decrease in volume of loans sold.
  • Other noninterest income increased $317,000 to $801,000 due to a $382,000 increase in swap fees to $624,000 in the first quarter of 2018 compared to $242,000 in the linked quarter.

Noninterest expense

  • Noninterest expense increased $852,000 to $16.2 million in the first quarter of 2018 compared to the linked quarter primarily due to a $395,000 increase in salaries and employee benefits and a $357,000 increase in other operating expenses.
  • Salaries and employee benefits increased $395,000 in the first quarter of 2018 compared to the linked quarter primarily due to a $245,000 increase in cyclical payroll tax related expenses and an $83,000 increase in share based compensation expense related to the 2016 Stock Incentive Plan.
  • Other operating expenses increased $357,000 in the first quarter of 2018 compared to the linked quarter primarily due to increases of $209,000 in 3rd party services.

Income tax expense

Income tax expense was $1.4 million in the first quarter of 2018 and $7.5 million in the fourth quarter of 2017.  As a result of the Tax Act, the Company recorded a reduction in the value of its net deferred tax asset resulting in a charge of $5.0 million to income tax expense in the fourth quarter of 2017.

First quarter 2018 compared with first quarter 2017

Net interest income

  • Net interest income increased $1.7 million or 9% to $20.9 million in the first quarter of 2018 compared to the prior year quarter due primarily to a $195.8 million increase in the average loans balance and a 12 basis point increase in the loans yield to 3.76% offset by a $1.6 million increase in interest expense.  
  • Net interest margin was 2.90% in the first quarter of 2018 compared to 2.94% in the prior year quarter.  The Tax Act negatively affected the net interest margin by 4 basis points on a tax-equivalent basis in the first quarter of 2018. 
  • The cost of interest-bearing liabilities increased 21 basis points to 97 basis points in the first quarter of 2018 compared to 76 basis points in the prior year quarter.

Provision for loan losses

  • Provision for loan losses was $465,000 for the first quarter of 2018 compared to $325,000 for the prior year quarter.
  • Net charge-offs in the quarter were $293,000 or 0.04% to average loans (annualized) compared to $505,000 or 0.08% to average loans (annualized) in the prior year quarter.
  • The allowance for loan losses represented 0.80% of total loans at March 31, 2018 and 0.82% of total loans at March 31, 2017. 

Noninterest income

  • Total noninterest income was $3.1 million in the first quarter of 2018 compared to $3.2 million in the prior year quarter.
  • Net gain on loans sold decreased to $288,000 from $416,000 primarily due to a decrease in volume of loans sold.
  • Other noninterest income includes swap fees totaling $624,000 compared to $711,000 in the prior year quarter.

Noninterest expense

  • Noninterest expense increased $1.1 million to $16.2 million in the first quarter of 2018 compared to the prior year quarter primarily due to a $632,000 increase in salaries and employee benefits expense and a $441,000 increase in other operating expenses.
  • Salaries and employee benefits increased $632,000 to $9.8 million primarily due to general salary increases which became effective in March 2017 and a $123,000 increase in share based compensation expense related to the 2016 Stock Incentive Plan.
  • Other operating expenses increased $441,000 to $3.2 million primarily due to increases of $232,000 in 3rd party services.

Income tax expense

Income tax expense was $1.4 million in the first quarter of 2018 compared to $1.8 million in the prior year quarter. As a result of the Tax Act, the Company's federal tax rate was lowered from 35% to 21% for the first quarter of 2018.

March 31, 2018 compared to March 31, 2017

Financial Condition

  • Total assets increased $233.4 million or 8% at March 31, 2018 to $3.1 billion compared to $2.9 billion at March 31, 2017, reflecting a $208.7 million increase in net loans.
  • Our investment portfolio totaled $176.9 million at March 31, 2018 compared to $155.9 million at March 31, 2017, an increase of $21.1 million.
  • Net loans increased $208.7 million or 8% at March 31, 2018 to $2.8 billion compared to $2.6 billion at March 31, 2017 due to our continued focus on commercial and residential lending.
  • Deposits increased $155.5 million or 7% to $2.4 billion at March 31, 2018 compared to $2.3 billion at March 31, 2017 primarily due to an increase in retail deposits as we continue to develop and grow relationships in the geographical areas we serve.  We had municipal deposit balances totaling $424.6 million and $451.2 million at March 31, 2018 and 2017, respectively. 
  • Federal Home Loan Bank of Boston advances increased $73.4 million to $355.5 million at March 31, 2018 compared to $282.1 million at March 31, 2017. 

Asset Quality

  • At March 31, 2018 the allowance for loan losses represented 0.80% of total loans and 175.73% of non-accrual loans, compared to 0.82% of total loans and 142.15% of non-accrual loans at December 31, 2017 and 0.82% of total loans and 133.63% of non-accrual loans at March 31, 2017.
  • Loan delinquencies 30 days and greater represented 0.46% of total loans at March 31, 2018 compared to 0.63% of total loans at December 31, 2017 and 0.67% of total loans at March 31, 2017.
  • Non-accrual loans represented 0.46% of total loans at March 31, 2018 compared to 0.58% of total loans at December 31, 2017 and 0.61% of total loans at March 31, 2017.
  • Net charge-offs in the quarter were $293,000 or 0.04% to average loans (annualized) compared to $53,000 or 0.01% to average loans (annualized) in the linked quarter and $505,000 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 12.38% at March 31, 2018. 
  • Tangible book value per share is $17.32 compared to $17.08 on a linked quarter basis and $16.62 at March 31, 2017.
  • The Company had 600,945 shares remaining to repurchase at March 31, 2018 from prior regulatory approval. Repurchased shares are held as treasury stock and will be available for general corporate purposes. 
  • At March 31, 2018, 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 25 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, April 19, 2018 at 10:30am Eastern Time to discuss first 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
  March 31,   December  31,   September 30,   June 30,   March 31,
(Dollars in thousands, except per share data)   2018       2017       2017       2017       2017  
Selected Financial Condition Data:                  
                   
Total assets $ 3,137,645     $ 3,055,050     $ 3,001,679     $ 2,992,126     $ 2,904,264  
Cash and cash equivalents   26,452       35,350       44,475       46,551       36,427  
Securities held-to-maturity, at amortized cost   80,977       74,985       56,848       50,655       50,320  
Securities available-for-sale, at fair value   95,945       87,251       87,299       112,443       105,541  
Federal Home Loan Bank of Boston stock, at cost   17,665      
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