First Connecticut Bancorp, Inc. reports second quarter 2018 net income of $6.7 million or $0.42 diluted earnings per share

FARMINGTON, Conn., July 18, 2018 (GLOBE NEWSWIRE) -- First Connecticut Bancorp, Inc. (NASDAQ:FBNK), the holding company for Farmington Bank, reported a 35% increase in net income of $6.7 million or $0.42 diluted earnings per share for the quarter ended June 30, 2018 compared to net income of $5.0 million or $0.32 diluted earnings per share for the quarter ended June 30, 2017. 

Net income on a core earnings basis was $7.4 million, or $0.46 diluted core earnings per share for the quarter ended June 30, 2018 compared to $5.0 million, or $0.31 diluted core earnings per share for the quarter ended June 30, 2017.  Core earnings exclude non-recurring items. 

On June 19, 2018, First Connecticut Bancorp, Inc. (“FCB”) announced its entry into a definitive Agreement and Plan of Merger with People’s United Financial, Inc. ("People's United"), pursuant to which FCB will merge with and into People's United.  Completion of the transaction is subject to customary closing conditions, including receipt of regulatory approvals and the approval of First Connecticut Bancorp, Inc. shareholders.

“I am pleased to report solid core second quarter earnings for the company. As indicated earnings were impacted by certain one-time charges related to our acquisition by Peoples United Financial, Inc. The Board of Directors and Senior Management have always focused on shareholder value and we believe this acquisition maximized shareholder value at a time when, we believe, the operating paradigm is changing for smaller community banks. I would also like to thank our dedicated employees who executed our strategy, which maximized our results for shareholders” stated John J. Patrick Jr., First Connecticut Bancorp’s Chairman, President and CEO.

Financial Highlights

• Net interest income increased $1.1 million to $22.0 million in the second quarter of 2018 compared to the linked quarter and increased $2.2 million compared to the second quarter of 2017.

• Organic loan growth remained strong during the second quarter of 2018 as loans increased $106.6 million to $2.9 billion at June 30, 2018 primarily due to an $81.9 million increase in residential real estate loans.  Loans increased $256.7 million or 10% from a year ago. 

• Asset quality remained strong as loan delinquencies 30 days and greater represented 0.44% of total loans at June 30, 2018 compared to 0.46% of total loans at March 31, 2018 and 0.60% of total loans at June 30, 2017.  Non-accrual loans represented 0.41% of total loans at June 30, 2018 compared to 0.46% of total loans at March 31, 2018 and 0.60% of total loans at June 30, 2017. 

• Overall deposits remained flat at $2.4 billion in the second quarter of 2018 compared to the linked quarter and increased $198.8 million or 9% from a year ago.

• Loans to deposits ratio was 120% for the quarter ended June 30, 2018 compared to 115% in the linked quarter and 119% in the second quarter of 2017.

• Checking accounts grew by 7% or 4,023 net new accounts from a year ago.

• Net interest margin was 2.90% in the second quarter of 2018 and in the linked quarter and 2.92% in the prior year quarter.

• Efficiency ratio was 63.96% in the second quarter of 2018 compared to 67.54% in the linked quarter and 66.31% in the prior year quarter.

• Noninterest expense to average assets was 2.01% in the second quarter of 2018 compared to 2.10% in the linked quarter and 2.12% in the prior year quarter.

• Tangible book value per share was $17.60 for the quarter ended June 30, 2018 compared to $17.32 on a linked quarter basis and $16.86 at June 30, 2017.

• The allowance for loan losses represented 0.78% of total loans at June 30, 2018 compared to 0.80% of total loans at March 31, 2018 and 0.83% at June 30, 2017. 

• The Company paid a quarterly cash dividend of $0.17 per share during the second quarter, an increase of $0.01 compared to the linked quarter and an increase of $0.05 from a year ago.

Second quarter 2018 compared with first quarter 2018

Net interest income

• Net interest income increased $1.1 million to $22.0 million in the second quarter of 2018 compared to the linked quarter primarily due to a $106.5 million increase in the average loans balance and a 8 basis point increase in the loan yield to 3.84% offset by a $939,000 increase in interest expense.

• Net interest margin was 2.90% in both the second quarter of 2018 and in the linked quarter.

• The cost of interest-bearing liabilities increased 10 basis points to 1.07% in the second quarter of 2018 compared to 0.97% in the linked quarter.

Provision for loan losses

• Provision for loan losses was $69,000 for the second quarter of 2018 compared to $465,000 for the linked quarter. 

• Net charge-offs in the quarter were $17,000 or 0.00% to average loans (annualized) compared to $293,000 or 0.04% to average loans (annualized) in the linked quarter.

• The allowance for loan losses represented 0.78% of total loans at June 30, 2018 and 0.80% of total loans at March 31, 2018. 

Noninterest income

• Total noninterest income increased $117,000 to $3.3 million in the second quarter of 2018 compared to $3.1 million in the linked quarter.

• Other noninterest income includes swap fees totaling $574,000 in the second quarter of 2018 compared to $624,000 in the linked quarter.

Noninterest expense

• Noninterest expense increased $780,000 to $17.0 million in the second quarter of 2018 compared to the linked quarter primarily due to increases in other operating expenses.

• Other operating expenses increased to $3.9 million primarily due to a $451,000 other real estate owned writedown, a $211,000 software termination buyout fee and $210,000 in acquisition related expenses.

Income tax expense

Income tax expense was $1.4 million in the second quarter of 2018 and in the linked quarter. 

Second quarter 2018 compared with second quarter 2017

Net interest income

• Net interest income increased $2.2 million or 11% to $22.0 million in the second quarter of 2018 compared to the prior year quarter due primarily to a $249.1 million increase in the average loans balance and a 19 basis point increase in the loans yield to 3.84% offset by a $2.2 million increase in interest expense.  

• Net interest margin was 2.90% in the second quarter of 2018 compared to 2.92% 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 second quarter of 2018. 

• The cost of interest-bearing liabilities increased 28 basis points to 1.07% in the second quarter of 2018 compared to 0.79% in the prior year quarter.

Provision for loan losses

• Provision for loan losses was $69,000 for the second quarter of 2018 compared to $710,000 for the prior year quarter.

• Net charge-offs in the quarter were $17,000 or 0.00% to average loans (annualized) compared to $22,000 or 0.00% to average loans (annualized) in the prior year quarter.

• The allowance for loan losses represented 0.78% of total loans at June 30, 2018 and 0.83% of total loans at June 30, 2018. 

Noninterest income

• Total noninterest income was $3.3 million in the second quarter of 2018 compared to $3.9 million in the prior year quarter.

• Net gain on loans sold decreased to $341,000 from $711,000 primarily due to a decrease in volume of loans sold.

• Bank owned life insurance income decreased $257,000 primarily due to receiving $271,000 in death benefit proceeds in the prior year quarter.

• Other noninterest income includes swap fees totaling $574,000 compared to $562,000 in the prior year quarter.

Noninterest expense

• Noninterest expense increased $1.1 million to $17.0 million in the second quarter of 2018 compared to the prior year quarter primarily due to a $1.1 million increase in other operating expenses.

• Other operating expenses increased $1.1 million to $3.9 million primarily due to a $451,000 other real estate owned writedown, a $211,000 software termination buyout fee and $210,000 in acquisition related expenses.

Income tax expense

Income tax expense was $1.4 million in the second quarter of 2018 compared to $2.1 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% beginning in the first quarter of 2018.

June 30, 2018 compared to June 30, 2017

Financial Condition

• Total assets increased $283.7 million or 10% at June 30, 2018 to $3.3 billion compared to $3.0 billion at June 30, 2017, reflecting a $256.1 million increase in net loans.

• Our investment portfolio totaled $185.0 million at June 30, 2018 compared to $156.2 million at June 30, 2017, an increase of $28.8 million.

• Net loans increased $256.1 million or 10% at June 30, 2018 to $2.9 billion compared to $2.6 billion at June 30, 2017 due to our continued focus on commercial and residential lending.

• Deposits increased $198.8 million or 9% to $2.4 billion at June 30, 2018 compared to $2.2 billion at June 30, 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 $354.5 million and $351.3 million at June 30, 2018 and 2017, respectively. 

• Federal Home Loan Bank of Boston advances increased $68.0 million to $457.5 million at June 30, 2018 compared to $389.5 million at June 30, 2017. 

Asset Quality

• At June 30, 2018 the allowance for loan losses represented 0.78% of total loans and 190.12% of non-accrual loans, compared to 0.80% of total loans and 175.73% of non-accrual loans at March 31, 2018 and 0.83% of total loans and 137.54% of non-accrual loans at June 30, 2017.

• Loan delinquencies 30 days and greater represented 0.44% of total loans at June 30, 2018 compared to 0.46% of total loans at March 31, 2018 and 0.60% of total loans at June 30, 2017.

• Non-accrual loans represented 0.41% of total loans at June 30, 2018 compared to 0.46% of total loans at March 31, 2018 and 0.60% of total loans at June 30, 2017.

• Net charge-offs in the quarter were $17,000 or 0.00% to average loans (annualized) compared to $293,000 or 0.04% to average loans (annualized) in the linked quarter and $22,000 or 0.00% 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 12.23% at June 30, 2018. 

• Tangible book value per share is $17.60 compared to $17.32 on a linked quarter basis and $16.86 at June 30, 2017.

• The Company had 600,945 shares remaining to repurchase at June 30, 2018 from prior regulatory approval. Repurchased shares are held as treasury stock and will be available for general corporate purposes. 

• At June 30, 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.

Additional Information for Stockholders

In connection with the proposed merger, People's United will file with the Securities and Exchange Commission ("SEC") a Registration Statement on Form S-4 that will include a Proxy Statement of FCB and a Prospectus of People's United, as well as other relevant documents concerning the proposed transaction.  This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval.  Stockholders are urged to read the Registration Statement, the Proxy Statement of FCB and Prospectus of People's United regarding the merger when it becomes available and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information.  A free copy of the Proxy Statement/Prospectus, as well as other filings containing information about FCB and People's United, may be obtained at the SEC's Internet site (http://www.sec.gov).  A definitive copy of the Proxy Statement/Prospectus will also be sent to the FCB stockholders seeking any required stockholder approval. You will also be able to obtain these documents, free of charge, from FCB by accessing FCB's website at www.firstconnecticutbancorp.com under the tab "SEC Filings" and then under the heading "Documents" or from People's United at www.peoples.com under the tab "Investor Relations" and then under the heading "Financial Information."  Alternatively, these documents, when available, can be obtained free of charge from FCB upon written request to First Connecticut Bancorp, Inc. Investor Relations, One Farm Glen Boulevard, Farmington, Connecticut 06032, by calling (860) 284-6359, or by sending an email to investor-relations@firstconnecticutbancorp.com, or from People's United upon written request to People's United Financial, Inc., 850 Main Street, Bridgeport, Connecticut 06604, Attn: Investor Relations, by calling (203) 338-4581, or by sending an email to andrew.hersom@peoples.com.

FCB and People's United and certain of their directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of FCB in connection with the proposed merger.  Information about the directors and executive officers of FCB is set forth in the proxy statement for FCB's 2018 annual meeting of stockholders, as filed with the SEC on a Schedule 14A on March 30, 2018.  Information about the directors and executive officers of People's United is set forth in the proxy statement for People's United's 2018 annual meeting of stockholders, as filed with the SEC on a Schedule 14A on March 7, 2018.  Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the Proxy Statement/Prospectus regarding the proposed merger when it becomes available.  Free copies of this document may be obtained as described in the preceding paragraph.

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)

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Selected Financial Data (Unaudited)

First Connecticut Bancorp, Inc.
Consolidated Statements of Condition (Unaudited)

First Connecticut Bancorp, Inc.
Consolidated Statements of Income (Unaudited)

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Consolidated Average Balances, Yields and Rates (Unaudited)

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Consolidated Average Balances, Yields and Rates (Unaudited)

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 June 30, 2018, March 31, 2018, December 31, 2017, September 30, 2017 and June 30, 2017.  The Company believes the use of these non-GAAP financial measures provides additional clarity in assessing the results of the Company.